By Rhodri Morgan
Wind power has long been front and centre of the UK’s green transition over the last few years, with wind farms being rolled out in the UK’s surrounding seas.
The clean-energy industry, in particular wind, has boomed and worked on the broad assumption that costs will only come down in the future.
A dividend suspension, exits from international offshore markets and up to 800 job cuts globally.
This comes after the firm’s CFO and COO were dismissed and it cancelled two mega offshore wind farm projects in the US at a cost of more than £3bn.
Its struggles come as the offshore wind industry faces many challenges – a high-interest rate environment, soaring costs and continuous supply chain disruption. Mads Nipper, the head of Orsted, spelt out the situation clearly in a recent interview.
“Capital is the fuel of renewable energy,” Nipper said. “If the financing costs go up significantly, then prices have to go up.”
If the firm runs into further problems, it could pose a headache for the UK, where wind plays a key part in its net zero transition. Orsted announced plans late last year to develop the largest wind farm in the world just off the Yorkshire coast, known as Hornsea 3.
Siemens Gamesa – a company that racked up hefty losses and was bailed out by the German government last year after faults were discovered in its newest turbine models – will deliver the turbines at prices Orsted said are “competitive”.
All fingers crossed
But the climate that Orsted is operating will also pour further doubt on the UK’s wind ambitions.
According to a recent survey, only eight out of 200 offshore wind bosses are confident the UK can deliver its national production target of 50MW by 2030, with only 20MW currently in operation.
The principal driver of their doubts is the limited capacity of the UK’s ports, which they say is too limited to support both the oil and gas and offshore wind sectors.
They also warn that the National Grid needs to build many more transmission lines to connect this wind power to the grid.
Solving these problems won’t be easy either. There is no suggestion that wind power generation will grind to a halt. Fossil fuels are playing a smaller role, in Europe at least, as wind and solar press ahead.
But interest rates are set to come down in the western world this year, and won’t return to the lows we were all used to for a long time. Supply chain snarl-ups could also continue, as demonstrated by the Red Sea crisis.
UK policy-makers responsible for drawing up our future renewable transition plans should perhaps consider that the industry might not grow as quickly as it used to.
