All that may make you feel virtuous but anything and everything you buy is dominated by fossil fuels. The externalities argument is utterly tosh and a false way of trying to make ruinables look more cost effective - they are parasitic, they can't power modern soiceties (it was tried in Spain and they rowed back super quick). The market knows how to price products and services so everything is included whereas Govt intervention always messes things up. Always. And hey presto Govts have managed to make our electricity the most expensive in the western world. The Iberian Peninsula has just had a catastrophic event because of ruinables. FF have added nothing but value to people other than when they are used for mining rare earth's for ruinables (lithium mines are pretty toixic). FF bring value to Society. Oh, and those glasses of yours.... thank fossil fuels.
Rumours of CP2030s demise are grossly exaggerated.
It is highly likely it is Trump's tariffs and the uncertainty introduced by Trump which has messed up the Ørsted Hornsea 4 project risk levels, interest rate and supply chain certainty, so it is not entirely surprising that this has happened. However, Ørsted is hanging on to the development rights and can restart the project at any time.
Trump is likely to be chopping and changing for some time, and there won't be much relief from him before 2030 hits. The Russian invasion of Ukraine might be settled well before that, which would also provide some relief to large project interest rates and supply chains.
It is unlikely that this will kill CP2030. But it could move it back to CP2031, maybe. That probably doesn't matter in the grand scheme of things. In theory, a 2.4 GW project with 11-12 GW per year of CfD auctions should only move CP2030 back by 3-4 months.
Also, every time I've looked at the numbers, UK didn't need to implement the full quadrupling of offshore wind, doubling of onshore wind and tripling of solar, in order to implement an "almost clean 2030 power plan".
Trump's cancellation of wind offshore New England has actually freed up resources including vessels used for wind farm installation that are the choke point in the North Sea build out programme and turbine and cable manufacturing. UK dependence on China remains an increasingly important issue. I doubt we will return to anew ZIRP era, given the inflationary policies of the government and the need to prevent collapse of the pound, which would become an even bigger issue were we to replace it by the Euro.
Ørsted's action confirms that at £85/MWh today AR6 wind is unprofitable, and therefore AR7 bids will be at significantly higher prices if any are made at all, depending on where administrative strike prices are set: they will need to be comfortably over £100/MWh to attract much interest. Simple maths tells you that AR4 projects will be heavily loss making under their CFDs, especially since they become the cheapest to curtail. How that resolves remains to be seen, but further cancellations or bankruptcies are possible if the contracts cannot be renegotiated.
Peter, you're like those Japanese soldiers after WWII, still fighting the last war long after the fighting had finished.
Reading the transcript of Orsted's conference call, there is a worry that Trump might impact their US assets, but not Europe. The issues are as they mentioned: cost increases in the supply chain and rising interest rates. Renewables need free money to compete and that era has passed.
Supply chain price increases are a likely outcome of Trump tariffs. Interest rates could go either way as a result of Trump. It is possible we will get faster short term reduction but slower longer term reductions in interest rates.
But worst of all is the uncertainty the tariffs bring. Businesses hate uncertainty.
UK goods exports to the US have twice the value of UK goods imports from the US, although the services flow is the other way around. US tariffs will reduce UK GDP, which in turn are likely to reduce the value of the pound, which increases the cost of imports from the EU. i.e. increases UK offshore wind supply chain costs. More than 40% of offshore wind project costs are from abroad. e.g. turbine nacelles are not made in the UK, though rotors are.
Offshore wind (and all other CfD) projects only care about real interest rates (actual interest rates minus CPI inflation) because the CfD contract specifies CPI linked annual price uplifts. So the issues arise when interest rate reductions lag inflation falls, so do not get compensated by CfD. So these projects do not need zero interest rates - just lowish real interest rates.
Trump's actions have introduced a lot of uncertainty. Thus it is not surprising that the financial case Ørsted put together last year has changed. But at some point in the next couple of years, things will settle down, inflation will be under control and interest rates will stabilise.
Normally a project will be fine after it has passed FID, because back to back supply chain purchase contracts can safely have UK CPI increase clauses, because CfD compensates them. That protects both the project and suppliers.
Why has the pound gone from 1.23 to over 1.33 with Trump imposing tariffs? Your analysis is evidently faulty.
The dominant supply source for new wind farms is now China. That gives them pricing power and the ability to influence via supply chains which contracts get fulfilled in which order, even when turbines are being made by the local JV subsidiary of say Siemens Gamesa or Vestas in Tianjin.
Difficult for Ed when reality comes up and slaps him in the face, although the next danger is when he decides to increase subsidies for his CfD further increasing our unsustainable energy bills. He must be prevented from doing this, somehow?
I guess the operative words are “ in its current form” meaning that they could be convinced to change their minds if enough money is put on the table. Maybe this is where Great British Energy steps in.
They've heard things are going to be even better in AR7 so cancel the AR6 and wait for the golden goose.
Milibrain wont be jilted here he will double down in AR7.. to claim he has achieved his CP2030 goal irrespective of whether it gets built or not he's only interested in getting the IPCC plumb job.
Remember its all about beating his brother nothing more nothing less.
I have seen speculation on social media that Hornsea Project Four will simply be re-bid in AR7 to obtain better terms. However, I was sent a transcript of today’s Orsted earnings call and they repeated several times that the project will not be rebid in AR7 or AR8. This effectively means it cannot contribute to Miliband’s CP2030 plan.
AFAIK any cancelled projects still result in the party being wallied from the next round of bidding entirely. For AR7 DESNZ proposed that no capacity that had been previously bid in an earlier round should be allowed to rebid. No repeat of the AR6 top up for Hornsea 3.
Perhaps we might see Vattenfall return to the bidding after being wallied over Norfolk Boreas if maximum strike prices are set high enough. Norfolk Boreas itself is now owned by RWE.
They’ve taken a financial hit, so it looks real enough.
“As a consequence of the decision, Ørsted expects to incur break-away costs of DKK 3.5 to 4.5 billion in 2025. “The EBITDA impact is expected to be DKK 3.0 to 3.5 billion, this includes a write-down of the offshore transmission assets and a provision for contract cancellation fees (not part of guided EBITDA). In addition, capitalised construction costs of approx. DKK 0.5 to 1.0 billion will be written down (impact below EBITDA).”
We live near the Hornsea 3 hub outside Norwich. A blooming carbuncle on waht was pleasant countryside. The whole net zero project is in (very expensive) tatters but I doubt very much if Miliband and Starmer will give up on it.
Has it not gotten thru to you Brits that the whole CO2-climate change hypothesis is currently being demolished by the rest of the educated, civilized world ?? Carbon tax ?? Only completely foolish politicians would bother mandating that rubbish. It must really suck to be domiciled in the UK. You folks are headed for 3rd-world status quickly unless you make a U-turn very quickly. Energy is power; and nations with plentiful cheap energy are the only ones who have a prosperous economic future. So, how does the UK electorate let itself become shackled to such foolishness ?? Just vote your badly mistaken “leaders” out of office and make a fresh start. The eyes of the English speaking world are on the U.K. Don’t screw up…..
Do you volunteer to pay more carbon dioxide tax when you buy anything that has been touched in manufacture or transportation by ugly Fossil Fuels? Na. Thought not. Ruinables are way more expensive than FF - check out our domestic and wholesale prices. And that's even before the parasitic costs are added in. If so cheap why do they need massive subsidies?
Perhaps you should account for the benefits in the form of increased agricultural yields for a start. One sided analysis with heapings of bias and invention is not a good guide.
All that may make you feel virtuous but anything and everything you buy is dominated by fossil fuels. The externalities argument is utterly tosh and a false way of trying to make ruinables look more cost effective - they are parasitic, they can't power modern soiceties (it was tried in Spain and they rowed back super quick). The market knows how to price products and services so everything is included whereas Govt intervention always messes things up. Always. And hey presto Govts have managed to make our electricity the most expensive in the western world. The Iberian Peninsula has just had a catastrophic event because of ruinables. FF have added nothing but value to people other than when they are used for mining rare earth's for ruinables (lithium mines are pretty toixic). FF bring value to Society. Oh, and those glasses of yours.... thank fossil fuels.
Even the enthusiasts don’t like this event https://open.substack.com/pub/jeromeaparis/p/rsted-abandoning-hornsea-4-is-shameful
Thank you David, brave these days for the reality to be published against all the ideological trough. 👍
So even with these huge subsidies wind is still not viable?
Any word (or predictions) as to the strike prices to be offered in AR7?
None yet.
Rumours of CP2030s demise are grossly exaggerated.
It is highly likely it is Trump's tariffs and the uncertainty introduced by Trump which has messed up the Ørsted Hornsea 4 project risk levels, interest rate and supply chain certainty, so it is not entirely surprising that this has happened. However, Ørsted is hanging on to the development rights and can restart the project at any time.
Trump is likely to be chopping and changing for some time, and there won't be much relief from him before 2030 hits. The Russian invasion of Ukraine might be settled well before that, which would also provide some relief to large project interest rates and supply chains.
It is unlikely that this will kill CP2030. But it could move it back to CP2031, maybe. That probably doesn't matter in the grand scheme of things. In theory, a 2.4 GW project with 11-12 GW per year of CfD auctions should only move CP2030 back by 3-4 months.
Also, every time I've looked at the numbers, UK didn't need to implement the full quadrupling of offshore wind, doubling of onshore wind and tripling of solar, in order to implement an "almost clean 2030 power plan".
Trump's cancellation of wind offshore New England has actually freed up resources including vessels used for wind farm installation that are the choke point in the North Sea build out programme and turbine and cable manufacturing. UK dependence on China remains an increasingly important issue. I doubt we will return to anew ZIRP era, given the inflationary policies of the government and the need to prevent collapse of the pound, which would become an even bigger issue were we to replace it by the Euro.
Ørsted's action confirms that at £85/MWh today AR6 wind is unprofitable, and therefore AR7 bids will be at significantly higher prices if any are made at all, depending on where administrative strike prices are set: they will need to be comfortably over £100/MWh to attract much interest. Simple maths tells you that AR4 projects will be heavily loss making under their CFDs, especially since they become the cheapest to curtail. How that resolves remains to be seen, but further cancellations or bankruptcies are possible if the contracts cannot be renegotiated.
Peter, you're like those Japanese soldiers after WWII, still fighting the last war long after the fighting had finished.
Reading the transcript of Orsted's conference call, there is a worry that Trump might impact their US assets, but not Europe. The issues are as they mentioned: cost increases in the supply chain and rising interest rates. Renewables need free money to compete and that era has passed.
Supply chain price increases are a likely outcome of Trump tariffs. Interest rates could go either way as a result of Trump. It is possible we will get faster short term reduction but slower longer term reductions in interest rates.
But worst of all is the uncertainty the tariffs bring. Businesses hate uncertainty.
UK goods exports to the US have twice the value of UK goods imports from the US, although the services flow is the other way around. US tariffs will reduce UK GDP, which in turn are likely to reduce the value of the pound, which increases the cost of imports from the EU. i.e. increases UK offshore wind supply chain costs. More than 40% of offshore wind project costs are from abroad. e.g. turbine nacelles are not made in the UK, though rotors are.
Offshore wind (and all other CfD) projects only care about real interest rates (actual interest rates minus CPI inflation) because the CfD contract specifies CPI linked annual price uplifts. So the issues arise when interest rate reductions lag inflation falls, so do not get compensated by CfD. So these projects do not need zero interest rates - just lowish real interest rates.
Trump's actions have introduced a lot of uncertainty. Thus it is not surprising that the financial case Ørsted put together last year has changed. But at some point in the next couple of years, things will settle down, inflation will be under control and interest rates will stabilise.
Normally a project will be fine after it has passed FID, because back to back supply chain purchase contracts can safely have UK CPI increase clauses, because CfD compensates them. That protects both the project and suppliers.
Why has the pound gone from 1.23 to over 1.33 with Trump imposing tariffs? Your analysis is evidently faulty.
The dominant supply source for new wind farms is now China. That gives them pricing power and the ability to influence via supply chains which contracts get fulfilled in which order, even when turbines are being made by the local JV subsidiary of say Siemens Gamesa or Vestas in Tianjin.
The 2030 target was always an impossible goal. Many of us knew it the moment it was announced.
Even if it was possible, the net gain in actual energy delivered to the Grid would be much, much lower than they envisioned.
Thank you David for sharing this good news. I very much appreciated "the dead parrot" image. 😀
Difficult for Ed when reality comes up and slaps him in the face, although the next danger is when he decides to increase subsidies for his CfD further increasing our unsustainable energy bills. He must be prevented from doing this, somehow?
The country changed last Thursday....hurrah!
I guess the operative words are “ in its current form” meaning that they could be convinced to change their minds if enough money is put on the table. Maybe this is where Great British Energy steps in.
https://www.gbe.gov.uk/what-we-will-do
A company with one director and £100 share capital according to companies house
https://find-and-update.company-information.service.gov.uk/company/SC825539/filing-history
Here is the leadership team
https://www.gbe.gov.uk/leadership
They've heard things are going to be even better in AR7 so cancel the AR6 and wait for the golden goose.
Milibrain wont be jilted here he will double down in AR7.. to claim he has achieved his CP2030 goal irrespective of whether it gets built or not he's only interested in getting the IPCC plumb job.
Remember its all about beating his brother nothing more nothing less.
I have seen speculation on social media that Hornsea Project Four will simply be re-bid in AR7 to obtain better terms. However, I was sent a transcript of today’s Orsted earnings call and they repeated several times that the project will not be rebid in AR7 or AR8. This effectively means it cannot contribute to Miliband’s CP2030 plan.
AFAIK any cancelled projects still result in the party being wallied from the next round of bidding entirely. For AR7 DESNZ proposed that no capacity that had been previously bid in an earlier round should be allowed to rebid. No repeat of the AR6 top up for Hornsea 3.
Perhaps we might see Vattenfall return to the bidding after being wallied over Norfolk Boreas if maximum strike prices are set high enough. Norfolk Boreas itself is now owned by RWE.
I think the rules now say two allocation rounds, so it's still two years now there are annual rounds.
They’ve taken a financial hit, so it looks real enough.
“As a consequence of the decision, Ørsted expects to incur break-away costs of DKK 3.5 to 4.5 billion in 2025. “The EBITDA impact is expected to be DKK 3.0 to 3.5 billion, this includes a write-down of the offshore transmission assets and a provision for contract cancellation fees (not part of guided EBITDA). In addition, capitalised construction costs of approx. DKK 0.5 to 1.0 billion will be written down (impact below EBITDA).”
I wish both brothers would beat each other... I'm sure plenty of sticks are available. They could sell tickets to raise funds 🤣
Hopefully GB Energy will step in and purchase these assets.
We live near the Hornsea 3 hub outside Norwich. A blooming carbuncle on waht was pleasant countryside. The whole net zero project is in (very expensive) tatters but I doubt very much if Miliband and Starmer will give up on it.
Nah, they're just pining for the Fjords where the winds blow stronger?
Very interesting. Are the CFD prices £102/Mwh (2024 prices) per your analysis of AR6?
So presumably this announcement acknowledges that this project is uneconomic at this high price?
The current value of the Hornsea 4 CFD is £84.97/MWh.
https://register.lowcarboncontracts.uk/AR6-HPF-010/
New offshore wind: £58.87
https://www.herbertsmithfreehills.com/notes/energy/2024-posts/AR6-CfD-Results
Thanks.
So using CPI index at Jan 2012 (94.6) and Jan 2025 (135.4) gives an inflation factor of 1.4313.
Using that factor gives a 2025 strike price of £84.26/MWh. Is that right?
Has it not gotten thru to you Brits that the whole CO2-climate change hypothesis is currently being demolished by the rest of the educated, civilized world ?? Carbon tax ?? Only completely foolish politicians would bother mandating that rubbish. It must really suck to be domiciled in the UK. You folks are headed for 3rd-world status quickly unless you make a U-turn very quickly. Energy is power; and nations with plentiful cheap energy are the only ones who have a prosperous economic future. So, how does the UK electorate let itself become shackled to such foolishness ?? Just vote your badly mistaken “leaders” out of office and make a fresh start. The eyes of the English speaking world are on the U.K. Don’t screw up…..
Current price of H4 is £84.97/MWh
https://register.lowcarboncontracts.uk/AR6-HPF-010/
Seems fair - and cheaper than gas (which of course is not paying for its externalities).
https://www.ofgem.gov.uk/energy-data-and-research/data-portal/wholesale-market-indicators
Gas fired generation is currently about £75/MWh, of which about £15/MWh is carbon tax.
There's externalities for renewables of grid balancing and backup of about £32/MWh that need to be added to the CfD strike price.
The Carbon Tax is nowhere close to covering the true whole life cost of fossil fuels, so renewables are much, much cheaper than gas.
https://www.forbes.com/sites/erikkobayashisolomon/2024/06/29/the-cost-to-civilization-of-mispricing-carbon-are-enormous/
Do you volunteer to pay more carbon dioxide tax when you buy anything that has been touched in manufacture or transportation by ugly Fossil Fuels? Na. Thought not. Ruinables are way more expensive than FF - check out our domestic and wholesale prices. And that's even before the parasitic costs are added in. If so cheap why do they need massive subsidies?
Perhaps you should account for the benefits in the form of increased agricultural yields for a start. One sided analysis with heapings of bias and invention is not a good guide.
Ah the Norwegian Blue. It's just resting after being stunned.
Not just sleeping I hope