Orsted: gone with the wind

The poster child of offshore wind has decided to stop its Hornsea 4 development after just a few months.

via 3B75141/ Alamy

There is, according to the National Energy Network Operator, still a chance that Britain will meet its net zero by 2050 target. NESO does not quite suggest that the government moves to suspend the laws of thermodynamics, but “immensely challenging” is government-speak for impossible. Its dose of magical thinking came just before Orsted, the poster child of offshore wind, decided to stop its Hornsea 4 development, a project it took on only a few months ago.

The company’s CEO Rasmus Errboe had a whole litany of excuses, from supply chain problems to increased execution, market and operational risks, which were presumably not visible just a few short months ago when Orsted was awarded the contract to develop one of the UK’s biggest offshore windfarms. Orsted shareholders are stiffed with a £300m write-off. The shares took another downward lurch, and have now lost 80 per cent of their value in four years.

Orsted has not quite abandoned Hornsea completely - that would be just too embarrassing for poor Ed Milliband. A spokesman for his department burbled to the FT: “We recognise the effect that globally high inflation and supply chain constraints are having on industry across Europe. We have a strong pipeline of projects to deliver clean power by 2030.”

Well, not as strong as it was, obviously. Still, since his department’s prime role is to obfuscate the real costs of being world leaders in windmills-on-sea, its boffins will be trying to cook up new subsidies for old, perhaps by shunting Hornsea from last year’s licence round into the next one, on terms which will bring Orsted back on board and off shore. After all, it’s what the company does, for better or worse.

The Millibanders must go on pretending that there will be a miracle in the North Sea, but at some stage, the pretence will be impossible to sustain. The official “Clean Power Plan” calls for 50,000MW of installed capacity by 2030. Today’s total is about 15,000MW, and while the number is increasing slowly, what David Turver of Eigen Values calls the “reality gap” is about 20,000MW. As he says: “This might explain why Ed Miliband is chucking the kitchen sink at renewables Allocation Round 7, by considering extending the subsidy term from 15 years to 20 years and even offering contracts to projects without planning permission.”

Elsewhere in the UK government’s creaking machine, a few members are finally working out that the surest way to kill off what’s left of the country’s manufacturing base is to keep energy prices high. Oil prices are falling, world gas prices are headed downwards, but the subsidies for renewables are recycled into higher prices for users, industrial and domestic, of gas and electricity.

The energy market is complicated, but successive governments have so encrusted it with rules and the batting order for suppliers (mostly designed to protect intermittent sources of green energy) that operators and traders prosper by gaming the system. The latest wizard wheeze, of differential prices across the country to reflect the user’s distance from the generator, would add another layer of complexity if it went ahead.

The UK narrowly avoided blackouts last January, when the wind failed to blow in the North Sea. We may not be so lucky next time. The first step for the addict to beat an addiction is to admit that he has a life-threatening problem. It’s time for Mr Milliband to take that first step.