The Swedish state energy giant Vattenfall is stopping development of a proposed multibillion-pound wind farm off the coast of Norfolk because of soaring costs. The decision will be a blow to the government’s clean energy goals.
The company said it was stopping work on the 1.4 gigawatt Norfolk Boreas wind farm, which could power about 1.5 million homes, because costs had risen by up to 40 per cent. It said it was also reviewing the “best way forward” for its entire Norfolk offshore wind zone, which includes two further proposed projects — Norfolk Vanguard East and West — of 1.4 gigawatts each.
The three projects combined would probably have entailed investment of more than £10 billion and had been expected to help the government to deliver its ambitious target of 50 gigawatts of offshore wind by 2030.
Norfolk Boreas, about 30 miles off the coast of Norfolk, was one of five proposed offshore wind projects that secured contracts from the UK government a year ago to deliver electricity at a record low price of £37.35/megawatt-hour (MWh) in 2012 prices. The contract price is index-linked to inflation, making it worth more than £45/MWh today, but developers have warned that costs in the sector have risen even more steeply amid global supply chain disruption.
Anna Borg, chief executive of Vattenfall, said: “Although demand for fossil-free electricity is greater than ever, the market for offshore wind power is challenging. Higher inflation and capital costs are affecting the entire energy sector but the geopolitical situation has made offshore wind and its supply chain particularly vulnerable. Overall, we see cost increases up to 40 per cent.”
She said that the changes affected future profitability and had resulted in Vattenfall impairing the value of its Norfolk wind projects by 5.5 billion Swedish Krona (£410 million).
“We have decided to stop the development of Norfolk Boreas in its current form and not take an investment decision now due to mentioned factors, which triggers the impairment,” she said. “We will examine the best way forward for the entire Norfolk zone, which in addition to Boreas also includes the Vanguard East and West projects.
“We are convinced that offshore wind power is crucial for energy security and meeting the climate goals in Europe.”
The other four projects awarded contracts last summer include Orsted’s giant Hornsea Three wind farm off Yorkshire and ScottishPower’s East Anglia 3 project. Orsted warned earlier this year that Hornsea Three was at risk because of rising costs, but said last month that it did still expect to take a final investment decision on the project this year. Scottish Power is pressing ahead with development of East Anglia 3.