By Dominic Chopping
Swedish state-owned utility group Vattenfall announced on Thursday that it will discontinue the development of the Norfolk Boreas offshore wind farm off the coast of the U.K. due to escalating costs driven by higher inflation and interest rates.
According to Vattenfall CEO Anna Borg, “Although there is a growing demand for fossil-free electricity, the offshore wind power market presents significant challenges.” She added, “We are witnessing cost increases of up to 40%, which will impact our future profitability. As a result, Vattenfall is making an impairment for wind power in Norfolk, U.K.”
The decision to halt development has dealt a blow to Vattenfall’s earnings, leading to a 5.5 billion Swedish kronor ($535.3 million) loss in the second quarter. The company will now explore the best way forward for the entire Norfolk zone, comprising the Vanguard East and West projects.
Vattenfall secured a contract-for-difference from the U.K. government through an auction last year, guaranteeing a minimum price of £37.35 ($48.33) per megawatt hour of electricity generated by the Norfolk Boreas project. However, Vattenfall reported that this price is no longer sufficient to ensure project profitability due to the increased costs.
Helene Bistrom, head of Vattenfall’s wind business, emphasized the need for a new contract-for-difference that accurately reflects the current market conditions. She stated, “We are currently engaged in discussions with suppliers, the U.K. government, and developers to establish a contract-for-difference that aligns with the market situation. This is crucial for the continued expansion of offshore wind power in the U.K.”
The Norfolk Boreas project had a planned capacity to supply approximately 1.5 million homes in the U.K. Once the wider Norfolk zone is completed, it is expected to power a total of 4 million homes.