In a delightfully illustrative episode of reality biting back, one of the UK’s largest offshore wind farm projects has ground to a halt, not because of a lack of wind, but due to an unabating gust of rising costs. The illustrious Swedish energy group, Vattenfall, has put a stop to work on its 1.4GW Norfolk Boreas site, following a 40% surge in project costs. Clearly, “going green” isn’t as financially breezy as some might have you believe.
“What we see today, it simply doesn’t make sense to continue this project.”
This halt throws a monkey wrench into the UK’s fervent ambition to triple its offshore wind capacity by 2030 in order to decarbonize its electricity system. All this, while the cost efficiency and reliability of these grand projects remain questionable.
The Green Economy’s ‘Inconvenient Truth’ Interestingly, the UK government has been keen on flapping the wings of more wind power projects to meet its net-zero targets. However, with costs spiralling out of control, the move seems more like trying to fly into a headwind.
The fiasco stands as a testament to the impracticality of imprudently rushing towards renewable energy without addressing the inherent challenges and limitations of these technologies. Rising costs for equipment, supply chain disruptions, and the overarching reality of energy economics all play a part in this unfolding drama.
Sustainable or Unsustainable – That’s the Question The defunct Norfolk Boreas was intended to be the kingpin of the country’s major offshore wind projects. It’s aim? To power 1.5 million homes with up to 140 turbines. Yet, developers have acknowledged that projects with low locked-in electricity prices have turned uneconomical due to these escalating costs and disruptions.
This puts a spotlight on the term “sustainable.” While it sounds compelling in political speeches and looks impressive in policy documents, one is forced to question if these renewable energy ventures are truly sustainable – economically, that is.
The Green Mirage In February, it was reported that Vattenfall, along with Denmark’s Ørsted and other wind farm developers, were seeking tax breaks or subsidies as a remedy to their fiscal ailments. Perhaps the mirage of “cheap” renewable energy is starting to dissipate, exposing the harsh desert of economic reality beneath.
Despite the British government’s past assurance of inflation-linked prices over a 15-year period, Kathryn Porter from Watt-Logic argues that these contracts ignored the “economic reality” of cost pressures that were already apparent. It seems the notion of ‘green at all costs’ is beginning to wilt under the scorching sun of real-world economics.
The race to net zero is leading us into a financial quicksand, sucking in vast resources for a future that will never materialize as envisaged.
I highly recommend reading all of the comments on this WUWT article which include some very sound information about how Contracts for Difference (CfDs) and constraint payments i.e. curtailment works in the UK, for example. In my opinion, the best information, particularly from “It doesnot add up” was elicited in rebuttal to clear nonsense being spouted by one commenter in particular.
As an example, these are two of It doesnot add up’s comments:
Wrong. Curtailment is subject to the rules of the balancing mechanism. National Grid can instruct curtailment if it is unable to procure sufficient curtailment bids to preserve grid operations. Bids are limited party auctions depending on the locations of grid constraints.
Under most currently operating CFDs a prolonged period (over 6 hours) of negative day ahead prices results in no CFD compensation being paid at all. Under AR4 and AR5 CFDs that will drop to any hour with negative prices. There is an economic incentive to curtail voluntarily when no compensation is paid.
National Grid has just woken up to the implications of this, which is leading to all manner of market distortions and the need for extensive standby capacity with rapid ramping capability to handle mass economic self curtailment.
One of the UK’s biggest offshore wind farm projects has been halted due to rising costs, a major blow to the UK government as it tries to encourage more investment in renewable power to meet net zero targets.
Swedish energy group Vattenfall said it had halted development of its planned Norfolk Boreas wind farm after costs on the project surged 40 per cent.
Norfolk Boreas had been one of the biggest new projects in the offshore wind pipeline, set to power 1.5mn homes in the first phase of major developments by Vattenfall.
The 1.4GW project was awarded a contract from the government last year, guaranteeing it a fixed price of £37.35 per megawatt-hour for its electricity for the first 15 years, in 2012 prices and linked to inflation.
Vattenfall said it had not made a final investment decision on the project and would book an impairment charge of SKr5.5bn ($535mn).
“Increased cost of capital puts significant pressure on all new offshore wind projects,” it said in quarterly results on Thursday. “So far, financial frameworks have not adapted to reflect the current market conditions.”
