Renewable energy developer Orsted A/S won’t make a windfall profit from the surging costs of UK power despite delaying the start of a price cap on its latest and largest project off the coast of England.
(Bloomberg) — Renewable energy developer Orsted A/S won’t make a windfall profit from the surging costs of UK power despite delaying the start of a price cap on its latest and largest project off the coast of England.
The world’s biggest developer of offshore wind farms has fully commissioned its Hornsea 2 project, which will provide enough electricity for more than 1.4 million homes. Clean power sources like wind could help rein in power costs that are set to soar to record levels this winter. But that can only happen if operators sell power for cheaper than the market prices that are mostly set by expensive gas-burning plants.
Last year, Denmark-based Orsted delayed the start of a government-backed contract to sell electricity from Hornsea 2 at fixed prices for 15 years. That could have opened an opportunity for the company to make huge profits in the meantime since day-ahead electricity in the UK currently trades above £400 a megawatt-hour, more than five times Orsted’s contract price. The new start date is March 2023.
However, the company hedged the output from the wind farm at an even lower price than the one in its contract, said Paul Haines, a company spokesman.
“So we will not actually profit from higher electricity prices,” Haines said by email.
The company decided to delay the subsidy and sell power forward ahead of the contract’s start as a way to have stable revenues for a longer period overall, he said.
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