Ørsted to press ahead with world’s largest offshore wind farm in North Sea

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Ørsted is to press ahead with developing the world’s largest offshore wind farm in the North Sea after the UK increased financial support for the sector in a big boost for the Danish group after a string of setbacks.

The Copenhagen-listed company made the announcement on Wednesday about the 2.9GW Hornsea 3 project off the Yorkshire coast, which will be able to supply power for about 3.3mn homes. 

The group’s shares rose 3 per cent to DKr371 by the market close, although they remain more than 40 per cent down since the start of the year after the company walked away from two offshore wind projects in the US.

The announcement follows a DKr28.4bn ($4bn) writedown because of the problems in the US, which prompted the departure of finance chief Daniel Lerup and chief operating officer Richard Hunter in November.

The £8bn Hornsea 3 project, to be built with 14-megawatt turbines made by German manufacturer Siemens Gamesa, is Ørsted’s single biggest investment decision.

Duncan Clark, head of Ørsted’s UK operation, said the wind farm was “strategically very significant for the company; we have had it in our sights for a long time”. 

Ørsted had raised doubts about the project in March, calling on the UK government to offer more support to help it cope with a surge in costs, driven by rising interest rates and supply chain strains. 

It was among five projects that won contracts with the UK government in July 2022, guaranteeing an inflation-linked electricity price starting at £37.35 per MWh at 2012 prices. 

Rival Vattenfall in July halted work on its 1.4GW Norfolk Boreas project in the North Sea, which was also among the five winning contracts, arguing it “simply didn’t make sense to continue” given a 40 per cent surge in costs. 

Ørsted said it would bid for a higher price for a chunk of Hornsea’s capacity in the next annual auction for government contracts in 2024. Ministers have raised the maximum price available to £73 per MWh at 2012 prices in this round. 

Analysts at Bernstein expect it to try to get a higher price for roughly 700-megawatts of the project, based on what is allowed under the contracts.

Clark said the company had also taken other steps to get the project over the line, including talking with government and suppliers.

He added: “It has been a real collective effort. We have done things to de-risk the project. All of that taken together means we have a robust, investable business case.”

Hornsea’s foundations will be made by South Korean company SeAH’s factory in Teesside, north-east England, which is under construction. The wind farm should be up and running by the end of 2027.