The UK should be “very worried” by offshore wind giant Vattenfall’s decision to halt its Norfolk Boreas project – with the nation’s entire green agenda in danger if more “dominoes” fall, industry experts warned.

The Swedish group stunned the UK renewables sector today (Thursday) by announcing it would halt the 1.4GW North Sea project citing soaring costs that have rendered a contract for difference (CfD) power deal it won in renewable energy auctions only last year unviable.

Leo Bertels, managing consultant at renewables consultancy BVG Associates, told Recharge: “I’d say this is very worrying news for the government and UK decarbonisation. Developers have been threatening to pull the plug on UK CfD contracts due to rising costs for a while now, but this is the first time anyone has followed through.

“I’d say if Vattenfall are struggling to make the sums work then others are likely to be in a similar position. This could be the first of a number of dominoes to fall, putting the government’s energy security and carbon emission reduction ambitions – not to mention its target of 50GW offshore wind by 2030 – in serious jeopardy.”

The inflation tearing through the offshore wind supply chain – put as high as 40% by Vattenfall – has caused havoc to projects, as detailed in a recent report by industry specialist Westwood Global Energy Group, which said the global sector could face a $280bn costs-hit over the next decade.

Westwood senior analyst Peter Lloyd-Williams said of the latest Boreas news: “We count at least 12 projects that have run into inflation-related delays since the start of the year and it’s certainly a concern that a project that was only awarded CfD 12 months ago (and awarding preferred supplier agreements as recently as Spring) is already being put on halt.

“Most of the announcements we’ve seen so far have been in the US, but it wouldn’t be a surprise if we see more delays coming to light in Europe. You’ve got to wonder what this means for CfD Allocation Round 5, which is due to award in the coming months with bid maximums similar to last year’s auction.”

'Global inflationary pressures'

Dan McGrail, CEO of industry group RenewableUK urged the government to address the issues raised by Vattenfall and other industry players, who claim the regulatory and support framework in the world’s second largest offshore wind market is now dangerously out of step with market realities.

“As Vattenfall has pointed out, costs have been increasing significantly in the offshore wind supply chain, as they have for all major infrastructure projects and in the wider economy. Going forward, Ministers are going to have to take account of these global inflationary pressures, which have significantly changed the economic landscape,” McGrail said.

“We need a stronger industrial strategy for the sector, which the Chancellor should support with new measures in the Autumn Statement as a matter of urgency. Growing the UK’s supply chain won’t only bring new jobs to Britain, it will also help to ensure we can get on with the job of building new projects to provide cheap power for consumers, strengthening our energy security and tackling climate change.”

After announcing the Boreas halt, Vattenfall CEO Anna Borg was asked how other developers such as Iberdrola and Orsted were apparently pressing on with projects that also won deals at the same time as Norfolk Boreas.

Borg said: “We are not commenting on other projects because we don’t have insight on those

“We can clearly see the profitability level is not where it needs to be for Norfolk Boreas. The prudent decision is to stop the project and not make the final investment decision, and that’s what we’ve done.”