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Vattenfall is halting the development of a major offshore wind power project in the UK due to surging costs and challenging market conditions pressuring new developments, the Swedish utility said on Thursday.
Vattenfall will not proceed with the development of the 1.4-gigawatt (GW) Norfolk Boreas offshore wind project as the offshore wind industry has seen cost increases up to 40%, the company said in its Q2 results release today.
The soaring costs, coupled with increased cost of capital, put significant pressure on all new offshore wind projects, according to the Swedish firm.
“So far, financial frameworks have not adapted to reflect the current market conditions,” Vattenfall said in a statement.
“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,” President and CEO Anna Borg said.
“We have decided to stop the development of Norfolk Boreas in its current form and not take an investment decision now due to mentioned factors,” Borg added.
The project won a contract-for-difference (CfD) in a UK auction last year, and its halt could further challenge the UK’s target to have 50 GW of offshore wind capacity installed by 2030, up from 14 GW now.
“Today’s announcement from Vattenfall is a major wake up call for the UK Government who are failing to take account of the increased cost pressures and economic challenges facing offshore wind developers,” Claire Mack, Chief Executive at industry body Scottish Renewables, said, commenting on the decision to scrap the project.
“If projects in England are pausing development because they are not commercially viable then the projects that we have here in Scotland, which are more expensive to operate than those elsewhere in the country, are under threat and are clearly even more vulnerable to these cost pressures,” Mack added.
RenewableUK’s Chief Executive Dan 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.”
By Charles Kennedy for Oilprice.com
Charles is a writer for Oilprice.com