Hornsea Three risks being paused without subsidies

Plans for the world’s largest offshore windfarm are at risk of being shelved without government support.

Duncan Clark, head of Ørsted UK & Ireland, called on the government to announce subsidies in the upcoming Budget to help renewable energy project developers mitigate rising construction costs.

He said without support the £8 billion Hornsea Three project risks being put on hold.

“The upcoming Spring Budget offers a unique opportunity for the UK to take decisive action to maintain its leadership position in renewable energy and maximise the economic benefits for the UK,” Clark said.

“In the midst of intense global competition for investment, skills and supply chain resources, we are in a position where nationally significant projects like our proposed Hornsea Three offshore wind farm are at risk unless the government takes significant action to maintain the attractiveness of the investment environment.”

He added: “We are now at an inflection point and government intervention will be crucial to enabling projects that are key to the UK’s energy security and that will bring billions of pounds of investment into the UK, provide low-cost electricity for consumers and help deliver our net zero target.”

The 2.9GW Hornsea Three windfarm, about 75 miles off the coast of Norfolk, is slated to begin production in 2026. It won a contract for difference (CfD) in the government’s fourth allocation round last year.

However, Clark added that since the CfD auction there has been an extraordinary combination of increased interest rates and supply chain prices which are putting projects such as Hornsea Three at risk.

“Industry is doing everything it can to manage costs on these projects but there is a real and growing risk of them being put on hold or even handing back their CfDs, with repercussions that could impact across the economy as reserved capacity with supply chain businesses goes unfulfilled,” he said.

“This is why the sector is asking the government for targeted support to ensure the UK remains an attractive destination for investors. It would send a powerful message if government would consider a more suitable capital allowances regime, as it has for the oil and gas sector, which acknowledges the significant upfront investment required for these projects and enables us to recycle capital more effectively.”

Concerns have also been raised this week in relation to the government’s plans for onshore wind projects. RenewableUK has warned that new government planning rules do almost nothing to reverse the de-facto ban on onshore wind power in England and are in direct conflict with the government’s push to decarbonise the grid by 2035.

Analysis by Aurora, released this week, also shows that changes to planning restrictions will only have a minimal impact.

Tom Smout, senior research associate for the British power market at Aurora, added: “Lifting onshore wind restrictions in England would be a positive step for developers, but would need to be part of a larger suite of reforms in order to ramp up English onshore capacity.

“Current market design favours projects in high-wind locations, usually in Scotland, requiring targeted policy to attract developers to England instead.”