The Great Hornsea Project Three Cover Up

Conspiracy of silence from DESNZ, NESO and LCCC about the AR6 contract awards to Hornsea Project Three

Introduction

Regular readers may remember that I published an article suspicious of the contract awards to Hornsea Project Three in Allocation Round 6 (AR6) just after the results were announced last September. To recap, Hornsea Project Three was originally awarded a Contract for Difference (CfD) for 2,852MW in AR4 that took place in 2022 (see Figure 1).

Figure 1 - Hornsea Project Three Original AR4 Contract for 2,852MW

This was awarded at 37.35/MWh in 2012 money which equates to about £52/MWh at 2024 prices. Note however that the LCCC database is showing a current strike price of £48.69/MWh. AR4 contracts allow for 25% of the original capacity to be reduced by a mechanism called a “Permitted Reduction.” I thought it looked odd that AR6 contracts were awarded to Hornsea Project Three under the Permitted Reduction Scheme for 1,080MW or 37.9% of the original capacity (see Figure 2).

Figure 2 - Hornsea Project Three AR6 Permitted Reductions 1,080MW

The new contracts were awarded at £54.23/MWh in 2012 prices or about £76/MWh in 2024 money, recently indexed to £78.27/MWh. Orsted, the project operator, has clearly derived a benefit from re-bidding part of its project at a higher price. On the face of it, the scale of the contracts awarded under AR6 looks like a breach of the rules, but of course there might be an innocent explanation for the apparent discrepancy.

Three FOI Requests Later…

Fast forward to today, and three Freedom of Information (FOI) requests later, it certainly looks like the various authorities are trying to cover up what happened and why. The detail of my FOI exchanges with the Department for Energy and Net Zero (DESNZ), the Low Carbon Contract Company (LCCC) and the National Energy System Operator are shown in the Appendix below.

To cut a long story short, all three of the FOI requests I submitted have been refused. The reason for refusal of both the DESNZ and NESO requests was commercial confidentiality. LCCC did not want to reveal the information because they want to keep internal discussions confidential. The DESNZ and LCCC requests have been refused again through Internal Review and have now been submitted to the Information Commissioner’s Office (ICO) for adjudication. The results of the internal review of the initial refusal of the NESO request are overdue. In short, all three of the bodies with some responsibility for the contract awards do not think it is in the public interest to release information about how they managed to award contracts to Hornsea Project Three, apparently against the rules.

Hornsea Project Three Status

If we look at LCCC’s Contract Portfolio Status from 1 April 2025 we can see that Hornsea Project Three now has contracts totalling 3,226MW, some 374MW higher than the original contract award (see Figure 3).

Figure 3 - Hornsea Project Three CfD Contracts

The project website still claims the capacity is 2.9GW. Assuming this is not some sick April Fool’s joke, it is clearly ridiculous that the project has been awarded contracts for more capacity than is actually being built. Not only that, the new contracts are due to come online from mid-2027, some nine months before the original contract. It is unclear how this arrangement will work in practice when it is all built. Will they somehow ignore the lack of turbines and electricity from the main contract? Will the wind farm get paid twice for the same electricity if it has contracts covering more than the installed capacity? It is a mystery.

DESNZ Control the Contract Award Process

The mystery gets even deeper because examination of Companies House records show that both NESO and LCCC are controlled by Ed Miliband, the Secretary of State for DESNZ (See Figure 4).

Figure 4 - Ed Miliband Controls NESO and LCCC

If Miliband controls DESNZ, NESO and LCCC then none of the bodies responsible can be described as independent and there is an obvious lack of checks and balances in the contract award process.

Conclusions

The general public is paying the electricity bills that finance this fiasco and should be able to find out how and why this happened. Other offshore windfarm operators should be outraged too because Orsted appears to have been given preferential treatment. Instead, we have the absurd situation where it is deemed too commercially sensitive to release information that might shed light on what has happened. Or alternatively, too embarrassing for the LCCC to disclose the concerns their staff might have had signing off on such dodgy arrangements.

We can only hope that the ICO sees through this charade and forces the great Hornsea Project Three Cover Up to end.

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Appendix

FOI Request to DESNZ

My first port of call on September 9th 2024 was to ask the Department for Energy Security and Net Zero (DESNZ) for transcripts of all forms of contact with Orsted, the Hornsea Project Three developer, in relation to the AR6 contract award process. I also asked if they had had any contact with Baroness Brown who is a non-Executive Director of Orsted. I was also interested in what discussions might have occurred in relation to Sustainable Industry Rewards (SIRs), now called the Clean Industry Bonus.

DESNZ failed to reply by the deadline of October 4^th and had still not replied by October 19^th, so I asked for an internal review. I then got a reply on October 28^th asking for further clarification. After a further request for an internal review, I received a response on 30 December 2024.

They refused the request for transcripts of contact relating to AR6 on the grounds it would adversely affect the confidentiality of commercial or industrial information. They confirmed they had not had any contact with Baroness Brown. They released some information about their contacts in relation to SIRs, but this was highly redacted.

Because the response had been as a result of an internal review I referred the matter to the Information Commissioner’s Office (ICO) on 4 January 2025. The ICO initially refused to intervene because my first internal review had been about a procedural matter, not the content of their response. So, on January 14^th I requested an internal review of their decision, not just their tardy response. I argued that the public interest in understanding why and how the Government apparently came to break its own rules overrides the commercial considerations of the company benefitting from that breach.

The results of the internal review came through on January 30^th and not surprisingly, they refused my request again. However, they did note that both the National Energy System Operator (NESO) and the Low Carbon Contracts Company (LCCC) play a role in the Allocation Round process. NESO checks that developers are compliant with eligibility requirements and the LCCC monitors compliance with contractual requirements.

The response from DESNZ has been referred to the ICO, but it will take a while for them to make a ruling. However, their mention of NESO and LCCC prompted the second and third FOI requests.

FOI Request to NESO about Hornsea Project Three

The FOI request to NESO on February 3^rd 2025 noted their role to check developers are compliant with eligibility requirements and asked for transcripts of contact to and from NESO about Hornsea Project 3 contracts awarded under AR6 and copies of internal working papers regarding the checking, approval and award of the contracts.

The refusal came through on March 3^rd confirming they held the information I was seeking but refused to release it citing the same commercial confidentiality reasons as DESNZ. I requested an internal review on the same day noting that it is unfair on other market participants to not know how this decision to award the contracts was made. Moreover, it is unfair on the general public for a larger part of Hornsea 3 to be re-bid at higher prices than is allowed in AR4 contracts and for the decision-making process to be kept confidential.

Their self-imposed deadline to reply to the internal review has passed, and despite receiving a chaser email, no response has yet been forthcoming.

FOI Request to LCCC

The FOI request to the LCCC on February 4^th 2025 noted their role in monitoring compliance with contractual requirements following award of contracts and asked for transcripts of contact to and from LCCC about Hornsea Project 3 contracts awarded under AR6 and copies of internal working papers regarding the checking and approval of compliance of Hornsea Project 3 with the contracts awarded under AR4 and AR6.

The LCCC responded on February 18^th. They claimed they held no information regarding the award of contracts under AR6. Their response admitted they held internal working papers regarding the checking and approval of compliance of Hornsea Project 3 with the contracts awarded under AR4 and AR6. However, they refused to release the information under Regulation 12(4)(e) of the Environment Information Regulations which is an exception that covers internal communications. However, they did confirm that the AR4 Hornsea 3 project had reduced its initial installed capacity estimate by 25%, in line with the terms of its AR4 CfD.

Needless to say, I did not think this response was satisfactory so requested an internal review on February 20^th. I noted that on the face of it, Hornsea Project 3 is in breach the Permitted Reduction rules because it received contracts in AR6 for 37.9% of the original capacity awarded in AR4, when the permitted reduction is just 25%. I also noted that LCCC had confirmed that Hornsea has been granted at 25% reduction to its AR4 contract and so it remains a mystery why it was awarded contracts more than this limit in AR6 and remain in compliance with its contracts. I argued that it is in the public interest to understand whether and how Hornsea Project 3 remains in compliance with its AR4 and AR6 contracts. I argued that the public interest should override concerns about the internal free-exchange of ideas within LCCC.

The results of the internal review came through on March 14^th. They continued to withhold the information saying CfDs are private law contracts and it is important for the integrity of the scheme that LCCC, as the designated CfD counterparty under the Energy Act 2013, can monitor, evaluate and discuss internally ongoing compliance with its CfDs. Not being able to do this in a confidential manner would adversely affect LCCC’s ability to carry out its regulatory and contractual obligations. They went on to say that my question had already been answered. They said:

“Having reviewed your request, it appears that you are particularly interested in whether Hornsea 3 is in breach of the 25% limit on permitted reductions in its AR4 Contract for Difference. Our response to your request on 18 February 2025 confirmed that Hornsea 3’s permitted reduction was within the 25% limit, however, by way of further assistance on this question I refer you to our public schemes register that clearly sets out to extent of the permitted reduction for this project, along with other project specific information [see Figure 5] …

Figure 5 - Hornsea Project Three Permitted Reduction

“The register confirms that this particular project elected to reduce its initial installed capacity by 705.9MW which equates to a reduction of 24.75%.”

This felt like a brush off to me, missing the point about the AR6 contract awards above the permitted reduction limit entirely. Accordingly, this FOI request has also been referred to the ICO.