Orsted says huge UK Hornsea 3 wind project at risk without government action

By Susanna Twidale

LONDON (Reuters) - Development of what would be the world’s largest wind farm off the coast of Britain is in doubt, with developer Orsted saying it needs more support from the government such as tax breaks to proceed with the project after costs soared.

The 8 billion pound ($9.6 billion) Hornsea 3 project is expected to have a capacity of almost 3 gigawatts (GW) when built, enough to power around 3.2 million homes, and is seen as vital to Britain’s push to increase energy security and rapidly increase its renewable power output to meet climate targets.

The project, due to begin production in 2026, won a government contract at auction with a minimum price guarantee, called a contract-for-difference (CfD), worth 37.35 pounds per megawatt hour (MWh) in 2012 prices, around 45 pounds/MWh today.

Although the contract is index-linked to inflation it is now worth significantly less than current electricity prices of around 130 pound/MWh.

"Since the auction there has been an extraordinary combination of increased interest rates and supply chain prices," Duncan Clark, Head of Orsted UK & Ireland said in a statement.

“Industry is doing everything it can to manage costs on these projects but there is a real and growing risk of them being put on hold or even handing back their CfDs,” he said.

Clark is calling on the government to offer targeted support for the renewable sector, such as tax breaks on investments similar to those seen in the oil and gas sector, at the upcoming Spring budget on March 15.

Britain has a target of 50 GW of offshore wind capacity by 2030, up from almost 14 GW currently and is aiming for net zero emissions by 2050.

($1 = 0.8338 pounds)

(Reporting By Susanna Twidale; Editing by Kirsten Donovan)