The UK Department for Energy Security and Net Zero (DESNZ) has awarded Ørsted new contracts for difference (CfD) for two of its offshore wind projects, Hornsea 3 and Hornsea 4, in its sixth allocation round. These contracts, which are essential for promoting renewable energy projects, have been granted for a capacity of 1,080 MW for Hornsea 3 and 2,400 MW for Hornsea 4. The strike prices for these CfDs are set at inflation-indexed rates of GBP 54.23 per megawatt-hour (MWh) for Hornsea 3 and GBP 58.87 per MWh for Hornsea 4, both based on 2012 prices.
Ørsted’s Deputy CEO and Chief Commercial Officer, Rasmus Errboe, expressed satisfaction with the outcome: “We’re pleased with the outcome of allocation round 6, which is an important milestone for two of the world’s largest offshore wind farms. We look forward to delivering these landmark projects, which will supply renewable power at large scale to UK consumers and businesses and help the UK government achieve its target of quadrupling offshore wind capacity to 60 GW by 2030.”
Duncan Clark, Senior Vice President and Head of UK & Ireland at Ørsted, emphasized the importance of maintaining the momentum in renewable energy development. “The important takeaway from this allocation round is that progress is being made, and it’s crucial that this momentum continues to grow. The Government has shown it takes renewable energy seriously, and we’re confident it will continue working with the sector to increase the volume of projects deployed in the UK,” he said. Clark also highlighted the role of offshore wind in ensuring the UK’s energy security and providing low-cost, scalable electricity for consumers.
Hornsea 3 and 4: A New Era in Offshore Wind
Hornsea 3 is set to become the world’s largest offshore wind farm with a capacity of 2,955 MW, significantly contributing to the UK’s renewable energy landscape. Meanwhile, Hornsea 4 is expected to reach its final investment decision (FID) within the next 18 months, with a target commissioning date set before the end of 2030. Once completed, these projects will expand Ørsted’s presence in the Hornsea zone, adding to its existing gigawatt-scale projects, Hornsea 1 and Hornsea 2.
When Hornsea 3 comes online, the combined capacity of Ørsted’s projects in the Hornsea zone will exceed 5 GW, enough to power approximately 5 million UK homes. The addition of Hornsea 4 will further enhance this capacity, creating an offshore wind cluster of around 8 GW and unlocking additional synergies within the cluster.
Details of the CfD Contracts
The CfD contracts for Hornsea 3 are designed to run for up to 15 years, starting from the commissioning of the wind farm. The prices are indexed to inflation throughout the contract period, ensuring a stable and predictable revenue stream for Ørsted. After the CfD period ends, Hornsea 3 will either receive the prevailing market price for electricity or enter new power purchase agreements.
Ørsted is responsible for constructing the wind farms, including the associated transmission assets, such as offshore and onshore substations and export cables. Upon full commissioning, Ørsted will divest these transmission assets to new owners, as per UK regulations.
These new contracts do not alter Ørsted’s financial guidance for 2024, signaling steady progress in its plans to expand its offshore wind portfolio in the UK.
