If all goes according to plan, Hornsea 3 will be ready for completion in the English part of the North Sea at the end of 2027. With a capacity of 2.9 GW, the offshore wind farm will be the world's largest to date.
The realization of the project came a significant step closer on Wednesday, as Ørsted, which is behind the project, made a final investment decision for the project. The Danish energy company announced this in a statement.
In July 2022, Ørsted was awarded a contract for difference (CfD) on Hornsea 3 at an inflation-indexed settlement price of GBP 37.35 per MWh in 2012 prices.
The CfD terms allow Ørsted to reduce the allocated CfD capacity. This is an option that the company intends to use. Instead, part of the capacity from Hornsea 3 will be offered in the UK's upcoming sixth allocation round, Ørsted informs. In that allocation round, the British government has decided to raise the maximum settlement price.
- The global offshore wind market is extremely competitive, and therefore we appreciate the attractive policy framework conditions in the UK, which have helped to secure this investment. We look forward to building this landmark offshore wind farm, which will deliver significant amounts of green electricity to British households and businesses and will be a significant addition to the world's largest offshore wind area, says Mads Nipper, CEO and President of Ørsted.
Infrastructure from the sister farm enables profitability
The offshore wind industry is challenged by rising costs, but as Hornsea 3 will be established in close proximity to the sister farms Hornsea 1 (1.2 GW) and Hornsea 2 (1.3 GW), the project can benefit from, among other things, an already well-established supply chain and synergies with the two offshore wind farms.
According to Ørsted, this provides a robust risk/return profile and value creation, which is however around the lower end of the company's required return over the project life of 150-300 basis points in addition to the weighted average cost of capital (WACC).
This reflects that part of the capacity will obtain a CfD contract in the sixth award round. A possible future addition of the Hornsea 4 project (2.6 GW) will bring the capacity in the Hornsea area to over 7 GW and open up further economies of scale.
- By leveraging our leading capabilities in innovation, construction, operation, procurement and financing of offshore wind, we have managed to mature the world's largest offshore wind turbine project and make a final investment decision, says Mads Nipper.
All major contracts for Hornsea 3 are in place, including an agreement with Siemens Gamesa for their SG 14-236 DD offshore wind turbines.
Hornsea 3 is located 160 km off the coast of Yorkshire in north-east England. The project will be able to produce enough cheap, green electricity to supply over 3.3 million British households.
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