The harsh winds of fiscal reality have halted a Swedish company’s plans for a massive wind energy farm off the British coast in the North Sea.
The Swedish company Vattenfall is halting all work on the Norfolk Boreas windfarm, which was supposed to supply power to 1.5 million British homes, according to the Guardian.
“It simply doesn’t make sense to continue this project,” said Anna Borg, Vattenfall’s chief executive.
The project is no longer financially feasible, because costs rose 40 percent, according to Bloomberg.
The decision forces Vattenfall to eat a $536 million loss.
“Although demand for fossil-free electricity is greater than ever, the market for offshore wind power is challenging,” Borg said. “Higher inflation and capital costs are affecting the entire energy sector, but the geopolitical situation has made offshore wind and its supply chain particularly vulnerable.”
The company is owned by the Swedish government.
Last month, Sweden handed the green movement a setback by changing the nation’s goal from “100% renewable” to “100% fossil-free” electricity, which officials said paved the way for an increase in nuclear power.
The website Slay News reported that Finance Minister Elisabeth Svantesson called wind and solar power too “unstable” and that “substantial industrialized economies” required what she called a “nuclear pathway” in order to “remain industrialized and competitive.”
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Borg said it was “so obvious to everyone that the situation has changed dramatically since last year,” meaning the price the company would get for the power it produced would need to be “significantly higher,” according to the Guardian.
“The market framework is simply not reflecting the market situation,” Borg said. “Something needs to happen. It’s important to understand that our suppliers are being squeezed. They have problems in their supply chain so it’s not so easy to mitigate these situations.”
The project is designed to have between 90 and 156 wind turbines, that stand as tall as 350 meters, to the Eastern Daily Press.
According to Bloomberg, rising costs for materials, logistics and financing are posing daunting challenges for offshore wind development.
Britain has set a goal of increasing its offshore wind capacity to 50GW by a 500 percent increase over current levels.
Jess Ralston, the head of energy at the think tank the Energy and Climate Intelligence Unit2030, said the British government needs to set a higher price for wind projects than was offered to the Swedish company, according to the BBC.
“Costs of wind farms have been driven up by ongoing high gas prices causing supply chain inflation, just like for other industries,” Ralston said.
“If the government gets the policy wrong on the current round of renewables auctions and doesn’t keep pace with increasing costs, the UK could end up even more reliant on foreign gas, leaving households on the hook with higher bills,” Ralston said.
