Swedish utility Vattenfall is stopping development of the 1.4 gigawatt (GW) Norfolk Boreas wind project off the coast of Britain due to rising costs, it said in an earnings statement on Thursday.
The project, which was scheduled to begin producing electricity in the late 2020s was part of Britain’s plans to grow its offshore wind capacity to 50 GW by 2030 from around 14 GW now, to help meet its climate targets and boost energy security.
It could have provided electricity for around 1.5 million homes.
“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,” Vattenfall President and CEO Anna Borg said.
She said overall costs had increased by around 40% and that development of the project in its current form would be halted.
The company said the decision would have an impact on earnings of 5.5 billion Swedish crowns ($537 million).
The project won a contract-for-difference (CfD) in a British auction last year, guaranteeing a minimum price of 37.35 pounds per megawatt hour (MWh) in 2012 prices for the electricity produced, which equates to around 45 pounds/MWh today.
Since the auction, called round 4, some developers have warned that soaring project costs, inflation and interest rates have meant the price guarantee offered then could leave the projects uneconomic and called for targeted help for the sector.
Vattenfall also said it would examine the best way forward for the entire Norfolk zone which also includes the Vanguard East and West projects.
Combined, the three projects were expected to produce some 4.2 GW of electricity.
(Reporting by Susanna Twidale, editing by Gwladys Fouche and Emma Rumney)