“I think we really need to focus on ‘treating hard’ and ‘limiting what’s viable.'” My proposal on how to decarbonize power generation in the UK by 2030 suggests that clean energy is “reliable” and “attainable,” provided things don’t go too awry along the journey.
NESO’s ambitious £20 billion plan outlines the swift rollout of offshore and onshore wind, along with major upgrades to solar farms and power grids. Interestingly, the government made minimal changes to this proposal last year.
However, there’s currently a significant issue. Danish company Ørsted has halted construction on Hornsea 4, which is among the largest offshore wind projects in the world, located off the Yorkshire coast. The financial blow from cancelling orders with suppliers has been quite steep, exceeding £400 million.
You might assume that losing one wind farm wouldn’t drastically impact the overarching 2030 goal. While that’s somewhat accurate, there is a sense of urgency. A NESO report did mention “flexibility at margins” regarding technology, but the exact offshore wind capacity slated for 2030 is still unclear, estimated between 43 and 51 gigawatts, depending on how many carbon capture sites and green hydrogen plants are involved.
Still, the implications of losing Hornsea 4 are concerning. This project alone is 2.4GW in size, and as NESO has pointed out, offshore wind is considered the “bedrock” of a cleaner energy system, expected to contribute over half of the UK’s electricity generation. If the government aims for 20GW of offshore wind soon, the requirements have surged by about 10% unexpectedly. The timeline just got tighter.
Energy Secretary Ed Miliband has justifiable reasons to feel frustrated with Ørsted. The company cited supply chain costs, interest rates, and broader macroeconomic challenges, yet other offshore developers who secured contracts in last year’s auction are still moving ahead with their projects. It seems Ørsted may have bid too aggressively, potentially distracted by issues in the U.S., or maybe they faced disputes with suppliers. The outcome of the Hornsea project might have disappointed bidders like RWE.
On another note, analysts at Barclays have raised a concerning question—could Ørsted be on the verge of a real setback? Their announcement noted that Hornsea 4 will be scrapped “in its current form,” hinting the future might depend on if government contracts exceed £58.87 per megawatt hour related to offshore projects. Observations from the Energy Department about getting Ørsted back on track imply that negotiations could be in the works. If that’s the case, other developers from last year’s auction have every reason to be upset—they’re locked into their original agreements.
No matter the outcome with Hornsea 4, Ørsted’s latest move sends a troubling signal regarding pricing for renewable energy as we approach the AR7 auction set for this summer. Companies are unsettled about whether to switch to zone pricing for electricity, and it raises questions about what a reformed national market might look like if that plan falls through. This clarity is critical for those planning significant investments in energy generation.
It’s likely that this ongoing uncertainty is already pushing up prices for new offshore wind capacity. Ørsted’s challenges are indeed concerning, but analysts suggest the government’s ability to keep inflation around 10% on these offshore wind contracts might be the silver lining—even though that’s still pretty high.
The dilemma of setting a firm deadline for 2030 is that it may result in higher costs to get projects completed on time, or worse, necessitate renegotiations for essential developments. We might need to reserve our judgment until the actual figures come out during the AR7 auction, but, honestly, 2030 is beginning to look like a tight squeeze. Interestingly, many energy professionals didn’t even think it was a realistic target to begin with.
