Ørsted has decided to discontinue the Hornsea 4 project in the UK in its current form. Since the Contract for Difference (CfD) award in allocation round 6 (AR6) in September 2024, the 2400 MW Hornsea 4 project ‘has seen several adverse developments’, says Ørsted, relating to continued increase of supply chain costs, higher interest rates, and an increase in the risk to construct and operate Hornsea 4 on the planned timeline for a project of this scale.
In combination, these developments have increased the execution risk and deteriorated the value creation of the project. Ørsted has therefore taken the decision to stop further spend on the project at this time and terminate the project’s supply chain contracts, meaning that Ørsted will not deliver Hornsea 4 under the CfD awarded in Allocation Round 6.
Ørsted intends to evaluate options for future development of the Hornsea 4 project given the existing and continuing seabed rights, grid connection agreement and Development Consent Order.
Rasmus Errboe, group president and CEO of Ørsted, said: ”We remain fully committed to being an important partner to the UK government to help them achieve their ambitious target for offshore wind build-out and appreciate the work they’ve done to deliver a clear framework to support offshore wind. However, our capital allocation is based on a strict and value-focused approach, and after careful consideration, we’ve decided to discontinue the development of the Hornsea 4 project in its current form, well ahead of the planned Final Investment Decision [expected] later this year.”
“I’d like to emphasise that Ørsted continues to firmly believe in the long-term fundamentals of and value perspectives for offshore wind in the UK. We’ll keep the project rights for the Hornsea 4 project in our development portfolio, and we’ll seek to develop the project later in a way that is more value-creating for us and our shareholders.”
As a consequence of the decision, Ørsted expects to incur break-away costs of DKK 3.5 to 4.5 billion in 2025.
Tight margins
Sue Ferns, senior deputy general secretary of prominent energy union Prospect, commented: “Ørsted halting work on Hornsea 4 highlights how tight the margins are on a lot of offshore wind projects that the government is relying on to achieve Clean Power 2030. Intelligent public investment, through an institution like GB Energy, could help address this and accelerate deployment, and mitigate the need for greater consumer subsidies for renewable energy projects”.
Greenpeace UK’s head of climate, Mel Evans, said: “It is a tragic irony that gas-driven inflation is threatening the very thing that promises to bring down the soaring cost of energy, which has sent inflation and manufacturing costs through the roof. Getting off volatile and expensive gas and making renewables the backbone of our energy system has never been more necessary than it is right now.
“Post-covid supply chain breakdowns have also made everything much harder to build, on time or on budget. This is why the government must double down on its commitment to clean power and invest heavily in domestic wind manufacturing. This would help to overcome the supply chain issues faced by companies like Ørsted, and lower costs, which would be good for the government’s clean power plan.”
