THERE IS a question mark over a huge wind farm being planned off the North-east coast.
The Telegraph says a string of offshore wind projects meant to power Britain are now in jeopardy after costs soared.
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A surge in supply-chain costs has pushed up the price of wind turbines, while increases in global interest rates have also raised costs substantially.
This is said to have made several projects unviable just a year after they won UK Government subsidy contracts – leading to fears from industry insiders that Britain’s future is in jeopardy as the “Saudi Arabia of wind”.
Inch Cape, a joint venture between Ireland’s ESB and China’s Red Rock Power to develop a project located off Angus, is understood by the Telegraph to be at risk, with the Irish side refusing to proceed with a final investment decision after balking at the economics of the project.
One source said: “People won’t invest if it doesn’t give you a decent return on equity. And presently, it’s hard to see how it can.”
Inch Cape, which is intended to have 72 turbines, could power over 1.7million households.
The renewables hub at the Port of Dundee is due to be the pre-assembly site and the Port of Montrose the project’s operation & maintenance base.
Insiders suggested that Red Rock Power, a subsidiary of China’s state-backed SDIC, is willing to proceed with Inch Cape at a loss in order to avoid the embarrassment of abandoning what would be its biggest investment in offshore wind in Europe.
However, the Telegraph says it is understood that any decision to proceed would have to involve a project redesign.
A joint statement issued by ESB and Red Rock Power said the companies remained “strategically aligned and committed to the delivery of the Inch Cape offshore wind farm project”.
Other schemes developed by Danish company Orsted and Swedish player Vattenfall are among projects understood to be at risk, as the industry seeks more government help to ensure projects remain viable.
Fresh questions
The struggles faced by some of the biggest offshore wind developers raise fresh questions about whether the government will achieve its target of 50GW of offshore wind by 2030, from current levels of around 14GW.
Contracts for difference (CfDs) are designed to guarantee companies that operate offshore wind projects fixed prices to sell electricity over a 15-year period.
Last year’s CfD auction was the biggest to date and secured enough capacity to provide more than 10million homes with clean power.
However, it is understood that the £37.35 strike price secured by Inch Cape is currently “below the waterline” for ESB, meaning they are not satisfied with the level of returns on offer.
“It should be nearer £50 to £55,” a source said.
The Norfolk Boreas offshore wind farm operated by Vattenfall is understood to be at risk as costs mount.
Orsted’s Hornsea 3 in the North Sea is also thought to be at risk, although a spokesman insisted that the company was “increasingly confident that we will be in a position to take a final investment decision during 2023”.
The spokesman added: “The offshore wind sector has delivered huge growth in the UK over the last decade but it has arrived at an inflection point.
“It will require continued focus from stakeholders in government and across industry to ensure offshore wind delivers on its potential to become the backbone of the UK’s energy system and bring further investment, provide low-cost electricity for consumers and help deliver our net-zero ambition.”
