Sweden’s Vattenfall raised a huge question mark over the viability of UK offshore wind as it halted plans for a project due to form part of one of the world’s biggest developments on profitability grounds in the face of soaring costs.
The utility group today (Thursday) said it will stop development of the 1.4GW Norfolk Boreas project “in its current form and not take an investment decision now..”.
Vattenfall said it will also “examine the best way forward” for the rest of its Norfolk zone, which also includes the same-sized Norfolk Vanguard project and totals some 4.2GW.
The two North Sea projects are seen as vital to the UK’s plans to hit 50GW of offshore wind by 2030 up from about 14GW now.
The company told shareholders: “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.
“We see cost increases up to 40%.”
The Swedish state-controlled group will take a SKr5.5bn ($536m) earnings impairment on offshore wind, it said.
Norfolk Boreas won a contract-for-difference deal worth £37.35/MWh (at 2012 prices) in the UK's 2022 renewable energy auctions.
Siemens Gamesa has been lined up to supply turbines to the Norfolk projects under a 2021 preferred supplier agreement.
The entire UK and wider offshore wind sectors have been hammered by rising costs in the last 18 months, with projects already underway struggling to make the numbers add up and question marks being raised over others further down the pipeline.
Vattenfall added: "Over the past decade, Vattenfall has built up its wind operations which today is a valuable and profitable business generating an underlying profit of more than SKr16bn last year.
"We have attractive wind power projects in the pipeline, and investment decisions will always be based on profitability. We are convinced that offshore wind power is crucial for energy security and meeting the climate goals in Europe."
