Following the announcement by Vattenfall that it is stopping its Norfolk Boreas offshore wind farm project, various industry bodies have called for a review of policy and the Contracts for Difference (CfD) mechanism.
RenewableUK chief executive Dan McGrail said going forward, Ministers are going to have to take account of global inflationary pressures, which have significantly changed the economic landscape.
He said: “We need a stronger industrial strategy for the sector, which the Chancellor should support with new measures in the Autumn Statement as a matter of urgency.
“Growing the UK’s supply chain won’t only bring new jobs to Britain – it will also help to ensure we can get on with the job of building new projects to provide cheap power for consumers, strengthening our energy security and tackling climate change.”
Announcing the decision in its interim report for January to June 2023, Vattenfall said Norfolk Boreas gave rise to a negative impact of Skr5.5bn (€477m), resulting in profit for the first half of the year of Skr6.9bn, Skr3.4bn lower than in the same period of 2022.
Vattenfall chief executive Anna Borg said in the company’s report: “We have decided to stop the development of Norfolk Boreas in its current form and not take an investment decision now due to mentioned factors, which triggers the impairment.”
A spokesperson for Vattenfall in the UK told reNEWS the Norfolk Zone, including Boreas, “has been hit by the same price inflation of up to 40% that the whole industry is facing”.
A Department for Energy Security and Net Zero (DESNZ) spokesperson said the government recognises there are supply chain pressures for the sector globally and is “listening to companies’ concerns”.
“The move to annual auctions was introduced in response to calls from industry to run more frequent auctions and is set to bolster further investment and increase developer confidence in the sector every year,” said the DESNZ spokesperson.
In response to Vattenfall’s decision on Norfolk Boreas, Energy UK’s deputy director Adam Berman said: “The Contracts for Difference scheme has been instrumental in the creation of this world-leading industry but, as we recently highlighted, the government needs to recognise the much-changed economic picture for developers if the [CfD] scheme is to continue delivering in line with the government’s own targets.
“Industry stands ready to deliver, but without financially sustainable CfD prices, every day that passes will be one in which we could have benefitted from lower energy bills, lower emissions, and a more secure energy system.”
Scottish Renewables chief executive Claire Mack said Vattenfall’s announcement is a major wake-up call for the UK government which is failing to take account of the increased cost pressures and economic challenges facing offshore wind developers.
She added that if projects in England are pausing development because they are not commercially viable “then the projects that we have here in Scotland, which are more expensive to operate than those elsewhere in the country, are under threat and are clearly even more vulnerable to these cost pressures”.
She said the UK government needs to “urgently review” its investment framework for offshore wind and recognise the heavier costs on projects in Scotland.
Vattenfall will examine the best way forward for the entire Norfolk Zone, which in addition to Boreas also includes the Vanguard East and West projects.
Profit for the second quarter (April-June) fell to negative Skr4.9bn, compared with Skr4.2bn in the same period of 2022.