{"id":263832,"date":"2023-06-25T20:09:29","date_gmt":"2023-06-25T18:09:29","guid":{"rendered":"https:\/\/climatescience.press\/?p=263832"},"modified":"2023-06-25T20:09:32","modified_gmt":"2023-06-25T18:09:32","slug":"offshore-windfarms-threaten-to-pull-out-of-uneconomical-contracts","status":"publish","type":"post","link":"https:\/\/climatescience.press\/?p=263832","title":{"rendered":"Offshore Windfarms Threaten To Pull Out Of Uneconomical\u00a0Contracts"},"content":{"rendered":"\n
\"\"<\/figure>\n\n\n\n

<\/p>\n\n\n\n

From NOT A LOT OF PEOPLE KNOW THAT<\/a><\/p>\n\n\n\n

By Paul Homewood<\/p>\n\n\n\n

The wheels are falling off the offshore wind bandwagon:<\/strong><\/p>\n\n\n\n

\"\"<\/figure>\n\n\n\n

A string of offshore wind projects meant to power Britain are in jeopardy after the global race to net zero sent costs soaring, casting doubt over <\/em>the industry\u2019s future as a cheap source of energy<\/em><\/a>.<\/em><\/p>\n\n\n\n

A surge in supply chain costs has pushed up the price of wind turbines, while increases in global interest rates have raised refinancing costs substantially.<\/em><\/p>\n\n\n\n

It has made several projects unviable just a year after they won government subsidy contracts \u2013 leading to fears from industry insiders that <\/em>Britain\u2019s future is in jeopardy as the \u201cSaudi Arabia of wind\u201d<\/em><\/a>.<\/em><\/p>\n\n\n\n

Inch Cape, a 50:50 joint venture between Ireland\u2019s ESB and China\u2019s Red Rock Power to develop a project located 15km off the east coast of Scotland, is understood to be at risk, with the Irish side refusing to proceed with a so-called final investment decision (FID) after balking at the economics of the project.<\/em><\/p>\n\n\n\n

One source said: \u201cPeople won\u2019t invest if it doesn\u2019t give you a decent return on equity. And presently, it\u2019s hard to see how it can.\u201d<\/em><\/p>\n\n\n\n

Schemes developed by Danish company \u00d8rsted and Swedish player Vattenfall are among other projects understood to be at risk, as the industry seeks more government help to ensure projects remain viable.<\/em><\/p>\n\n\n\n

Senior executives have also described Net Zero Secretary Grant Shapps as a \u201cremote\u201d figure who is reluctant to engage with company bosses.<\/em><\/p>\n\n\n\n

The struggles faced by some of the biggest offshore wind developers raise fresh questions about whether the Government will achieve <\/em>its target of 50GW of offshore wind by 2030<\/em><\/a>, from current levels of around 14GW.<\/em><\/p>\n\n\n\n

So-called contracts for difference (CfDs) are designed to guarantee companies that operate offshore wind projects fixed prices to sell electricity over a 15-year period. If the market price falls below the so-called strike price, the Government makes up the difference.<\/em><\/p>\n\n\n\n

However, if the reverse is true, the companies must pay money back to the Government.<\/em><\/p>\n\n\n\n

Last year\u2019s CfD auction was the biggest to date and secured enough capacity to provide more than 10 million homes with clean power.<\/em><\/p>\n\n\n\n

However, it is understood that the \u00a337.35 strike price secured by Inch Cape is currently \u201cbelow the waterline\u201d for ESB, meaning they are not satisfied with the level of returns on offer.<\/em><\/p>\n\n\n\n

\u201cIt should be nearer \u00a350 to \u00a355,\u201d a source said.<\/em><\/p>\n\n\n\n

The Norfolk Boreas offshore wind farm operated by Vattenfall is also understood to be at risk as costs mount.<\/em><\/p>\n\n\n\n

A spokesman admitted that market conditions were \u201cextremely challenging\u201d, suggesting that a final investment decision was not forthcoming. He warned that the Government must reflect the realities of the market, suggesting Vattenfall was unwilling to proceed without more state help.<\/em><\/p>\n\n\n\n

Catrin Jung, the company\u2019s head of offshore wind, said: \u201cVattenfall has not yet taken FID on the Norfolk Boreas offshore wind farm.<\/em><\/p>\n\n\n\n

\u201cMarket conditions are extremely challenging currently, with rising costs and a supply chain crunch as well as increasing costs of capital. We are looking at the best way forward for all three projects which make up the 4.2GW Norfolk Offshore Zone and how we can work with the supply chain, including what opportunities there are for UK businesses.\u201d<\/em><\/p>\n\n\n\n

\u00d8rsted\u2019s Hornsea 3 in the North Sea is also understood to be at risk, although a spokesman insisted that the company was \u201cincreasingly confident that we will be in a position to take a Final Investment Decision during 2023\u201d.<\/em><\/p>\n\n\n\n

The spokesman added: \u201cThe offshore wind sector has delivered huge growth in the UK over the last decade but it has arrived at an inflection point.<\/em><\/p>\n\n\n\n

\u201cIt will require continued focus from stakeholders in Government and across industry <\/em>to ensure offshore wind delivers on its potential<\/em><\/a> to become the backbone of the UK\u2019s energy system and bring further investment, provide low-cost electricity for consumers and help deliver our net zero ambition.\u201d<\/em><\/p>\n\n\n\n

Insiders suggested that Red Rock Power, a subsidiary of China\u2019s 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.<\/em><\/p>\n\n\n\n

However, it is understood that any decision to proceed would have to involve a project redesign.<\/em><\/p>\n\n\n\n

A joint statement issued by ESB and Red Rock Power said the companies remained \u201cstrategically aligned and committed to the delivery of the Inch Cape Offshore Wind Farm project\u201d.<\/em><\/p>\n\n\n\n

A Department for Energy Security and Net Zero spokesman insisted that Mr Shapps \u201cregularly engages with the industry\u201d. The spokesman said: \u201cOffshore wind is a vital part of our work to boost energy security and cut emissions.<\/em><\/p>\n\n\n\n

\u201cOur plans to power up Britain, combined with the annual auction process now in place, gives the industry more confidence to invest.<\/em><\/p>\n\n\n\n

\u201cWe have already attracted \u00a3120bn of private investment in renewables since 2010 and expect to attract a further \u00a3100 billion of investment which will support up to 480,000 jobs by 2030.<\/em><\/p>\n\n\n\n

https:\/\/www.telegraph.co.uk\/business\/2023\/06\/24\/net-zero-at-risk-offshore-wind-companies-turn-away-britain\/<\/a><\/p>\n\n\n\n

It has been apparent for a long while that the prices agreed under CfDs by offshore wind farms are in no way viable. It is worth noting that the \u00a355\/MWh figure quoted as a reasonable price is at 2012 prices, and works out at about \u00a367\/MWh at current prices. This certainly does not equate to the \u201ccheapest\u201d claims made by the renewable lobby. Furthermore because CfD prices are inflation linked, these prices will likely be over \u00a380\/MWh by the time the wind farms come on stream.<\/p>\n\n\n\n

With interest rates now back to proper levels, and supply chain issues pushing up costs, the economics of offshore wind look distinctly unfavourable. If investors in these Round 4 auctions are getting cold feet, despite the fact they can sell on the free market anyway, what chance is there that investors will bother to bid at even lower prices for the next allocation round? And if these investors pull out, the 2030 wind power target is pie in the sky.<\/p>\n\n\n\n

Meanwhile the reply by the increasingly absurd DESNZ is the usual stock reply \u2013 \u00a3100 billion investment, which we will have to repay with interest eventually; and all of those wonderful green jobs, which never actually seem to materialise!<\/p>\n\n\n\n

But perhaps the most absurd comment of all is this:<\/p>\n\n\n\n

\u201cSenior executives have also described Net Zero Secretary Grant Shapps as a \u201cremote\u201d figure who is reluctant to engage with company bosses.\u201d<\/em><\/p>\n\n\n\n

Well, I am very sorry, but when you sign a contract, you are expected to fulfil it! You don\u2019t go back moaning a year or two alter saying \u201cI\u2019m sorry, but I got my calculations wrong, can I have some more money?<\/p>\n\n\n\n

FOOTNOTE<\/strong><\/p>\n\n\n\n

Yet again we see this silly comment by the Telegraph about a global race to net zero. <\/em>This is the pathetic nonsense spouted by the increasingly irrelevant Jeremy Warner and Ben Marlow.<\/p>\n\n\n\n

There is of course no such race, which implies that there is some sort of reward for those countries jumping off the clifftop first! On the contrary, most of the world is quite happy to let Britain, the EU and US continue with the madness, while they make themselves richer with the help of fossil fuels.<\/p>\n\n\n\n

<\/p>\n\n\n\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

There is of course no such race, which implies that there is some sort of reward for those countries jumping off the clifftop first! On the contrary, most of the world is quite happy to let Britain, the EU and US continue with the madness, while they make themselves richer with the help of fossil fuels.<\/p>\n","protected":false},"author":121246920,"featured_media":263837,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_coblocks_attr":"","_coblocks_dimensions":"","_coblocks_responsive_height":"","_coblocks_accordion_ie_support":"","_crdt_document":"","advanced_seo_description":"","jetpack_seo_html_title":"","jetpack_seo_noindex":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2},"jetpack_post_was_ever_published":false},"categories":[1],"tags":[691820479,691818154,691819988,691818390],"class_list":{"0":"post-263832","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","6":"hentry","7":"category-uncategorized","8":"tag-global-race","9":"tag-net-zero","10":"tag-telegraph","11":"tag-uk-offshore-windfarms","13":"fallback-thumbnail"},"jetpack_publicize_connections":[],"jetpack_featured_media_url":"https:\/\/i0.wp.com\/climatescience.press\/wp-content\/uploads\/2023\/06\/01920x1080.jpg?fit=1920%2C1080&ssl=1","jetpack_likes_enabled":true,"jetpack_sharing_enabled":true,"jetpack_shortlink":"https:\/\/wp.me\/paxLW1-16Dm","jetpack-related-posts":[{"id":375943,"url":"https:\/\/climatescience.press\/?p=375943","url_meta":{"origin":263832,"position":0},"title":"Shetland\u2019s 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