Wind Energy – Hornsea 3
Plans for the world’s single largest offshore wind farm have taken a major step forward today, with Ørsted announcing it has taken the final investment decision to proceed the Hornsea 3 project in the North Sea.
The Danish energy giant yesterday confirmed it has signed off on its financial plan to deliver the 2.9GW project, which is set to mark the third phase of the offshore wind farm following delivery of the existing 1.2GW Hornsea 1 and 1.3GW Hornsea 2 developments.
Hornsea 3 will be Ørsted’s third gigawatt-scale project in the Hornsea zone following Hornsea 1 (1.2 GW) and Hornsea 2 (1.3 GW), which are already being operated out of Ørsted’s operations and maintenance hub in Grimsby.
The UK is a core market for Ørsted and one of the world’s largest markets for offshore wind, building on strong political support and ambitious build-out targets. Ørsted currently operates 12 offshore wind farms in the UK.
In July 2022, Ørsted was awarded a contract for difference (CfD) for Hornsea 3 at an inflation-indexed strike price of GBP 37.35 per MWh in 2012 prices. The CfD framework permits a reduction of the awarded CfD capacity. Ørsted will use this flexibility to submit a share of Hornsea 3’s capacity into the UK’s upcoming allocation round 6.
Based on a well-established supply chain and synergies with Hornsea 1 and 2, Hornsea 3 has a robust risk-reward profile and a value creation around the bottom end of our targeted lifecycle project return range of 150-300 basis points on top of our weighted average cost of capital. This reflects part of the capacity being awarded a CfD in Allocation Round 6. The possible future addition of Hornsea 4 would create an offshore wind cluster in excess of 7 GW and unlock further cluster synergies.
Ørsted has all major contracts for Hornsea 3 in place, including an agreement with Siemens Gamesa for SG 14-236 DD offshore wind turbines, which have a capacity of 14 MW excluding power boost. Most of the capital expenditure for Hornsea 3 was contracted ahead of recent inflationary pressures, securing competitive prices from the supply chain and allowing time to work collaboratively on value creation opportunities. The larger wind turbines and the synergies with Hornsea 1 and 2 lead to lower operating costs than we have seen before in our portfolio.
Hornsea 3 will provide low-cost, green energy for the UK and deliver thousands of high-quality jobs and billions of pounds of investment in the UK’s offshore wind supply chain. Hundreds of companies are lined up to play a role in the construction and operation, supply, installation, commissioning, and long-term operation and maintenance of the wind farm.
Mads Nipper, Group President and CEO of Ørsted, said: “By applying our world-leading capabilities within offshore wind innovation, engineering, operations, procurement, and financing, we’ve been able to mature the world’s largest offshore wind project and take final investment decision. Offshore wind is an extremely competitive global market, so we also welcome the attractive policy regime in the UK which has helped secure this investment. We look forward to constructing this landmark project, which will deliver massive amounts of green energy to UK households and businesses and will be a significant addition to the world’s largest offshore wind cluster.”
Duncan Clark, Head of Ørsted UK & Ireland, said: “Hornsea 3 will be a cornerstone in achieving the UK government’s climate and clean energy targets while increasing energy independence and creating local jobs. Our decision to build Hornsea 3 is a vote of confidence in the UK market for offshore wind, as we continue to invest significantly in UK clean energy infrastructure and in the UK supply chain.”
With a capacity of 2.9 GW, Hornsea 3 will produce enough low-cost, renewable electricity to power more than 3.3 million UK homes, making a significant contribution to the UK government’s ambition of having 50 GW offshore wind in operation by 2030 as part of the British Energy Security Strategy.