Orsted takes final investment decision on Hornsea 3 offshore wind farm
Ørsted has taken final investment decision (FID) on the world’s single largest offshore wind farm, Hornsea 3, which will have a capacity of 2.9 GW and is expected to be completed around the end of 2027. Hornsea 3 will be Ørsted’s third gigawatt-scale project in the Hornsea zone following Hornsea 1 (1.2 GW) and Hornsea 2 (1.3 GW), which are already being operated out of Ørsted’s operations and maintenance hub in Grimsby, according to the company's release.
The UK is a core market for Ørsted and one of the world’s largest markets for offshore wind, building on strong political support and ambitious build-out targets. Ørsted currently operates 12 offshore wind farms in the UK.
In July 2022, Ørsted was awarded a contract for difference (CfD) for Hornsea 3 at an inflation-indexed strike price of GBP 37.35 per MWh in 2012 prices. The CfD framework permits a reduction of the awarded CfD capacity. Ørsted will use this flexibility to submit a share of Hornsea 3’s capacity into the UK’s upcoming allocation round 6.
Based on a well-established supply chain and synergies with Hornsea 1 and 2, Hornsea 3 has a robust risk-reward profile and a value creation around the bottom end of our targeted lifecycle project return range of 150-300 basis points on top of our weighted average cost of capital. This reflects part of the capacity being awarded a CfD in Allocation Round 6. The possible future addition of Hornsea 4 would create an offshore wind cluster in excess of 7 GW and unlock further cluster synergies.
Hornsea 3 will provide low-cost, green energy for the UK and deliver thousands of high-quality jobs and billions of pounds of investment in the UK’s offshore wind supply chain. Hundreds of companies are lined up to play a role in the construction and operation, supply, installation, commissioning, and long-term operation and maintenance of the wind farm.
With a capacity of 2.9 GW, Hornsea 3 will produce enough low-cost, renewable electricity to power more than 3.3 million UK homes, making a significant contribution to the UK government’s ambition of having 50 GW offshore wind in operation by 2030 as part of the British Energy Security Strategy.
Hornsea 3 will support up to 5,000 jobs during its construction phase, with up to a further 1,200 permanent jobs both directly and in the supply chain in the long operational phase. Hornsea 3 will be operated from Ørsted’s operations and maintenance hub in Grimsby.
Ørsted has already announced a series of significant supplier contracts – including an agreement for Hornsea 3 to be the first and lead customer at SeAH Wind’s monopile factory in Teesside, underpinning SeAH’s investment decision to establish a new, globally competitive monopile factory in the UK.
Hornsea 3 is located 160 km off the Yorkshire coast. When the wind farm comes online, Ørsted’s Hornsea trio – comprising Hornsea 1, 2, and 3 – will have a total capacity of in excess of 5 GW, making it the world’s largest operating offshore wind zone.
The Hornsea zone will also include Ørsted’s Hornsea 4 project, which could have a capacity of up to 2.6 GW. Hornsea 4 received its development consent order from the UK government earlier in 2023 and is now eligible for forthcoming CfD allocation rounds.
Ørsted will build Hornsea 3, including transmission assets (offshore and onshore substations and export cables). When the wind farm has been fully commissioned, Ørsted will, in accordance with UK regulation, divest the transmission assets to a new owner.
The CfD for Hornsea 3 runs for up to 15 years starting after commissioning of the wind farm, which is expected around the end of 2027. The strike price is inflation-indexed up to and throughout the CfD period. The nominal starting price per MWh will be determined based on the strike price plus accumulated inflation from 2012 until the CfD starts. After the CfD ends, Hornsea 3 will receive the market price for electricity or enter new power purchase agreements.
Ørsted's previously guided EBITDA for 2023 of DKK 20-23 billion, excluding new partnership agreements and provision related to Ocean Wind 1, remains unchanged.
