Ørsted Pulls Plug on Hornsea 4 as Offshore Wind Faces Mounting Headwinds
By: Velorine
Surging costs, higher interest rates, and mounting project risks push global wind giants to abandon major UK development.
In a sobering reflection of the economic headwinds buffeting the offshore wind industry, Danish energy giant Ørsted has announced it will not proceed with the 2.4GW Hornsea 4 project in its current form, citing deteriorating financial viability and escalating execution risks. The move comes just six months after the project secured a Contract for Difference (CfD) from the UK government, and underscores a broader recalibration across the sector.
The Hornsea 4 project, located about 69 kilometers off the Yorkshire coast, was expected to be one of the world’s largest offshore wind farms. But Ørsted now says that macroeconomic challenges chiefly rising interest rates, supply chain inflation, and increased construction complexity have undermined the project’s value proposition. The company anticipates termination costs of up to DKK 4.5 billion (€603 million) as it halts further investment and begins unwinding supplier contracts.
“We remain fully committed to being a key partner in the UK’s offshore wind ambitions,” said Ørsted Group President and CEO Rasmus Errboe. “But we must be disciplined in how we allocate capital. Current conditions do not allow Hornsea 4 to move forward in a way that is value-creating.”
Not Just an Ørsted Problem
Ørsted’s decision follows a growing pattern of turbulence across the global offshore wind landscape. In 2023, Ørsted was forced to abandon its US-based Ocean Wind I and II projects due to similar cost escalations. Industry peers have also faced setbacks: BP absorbed large impairments in the U.S. offshore market, and Sweden’s Vattenfall pulled out of its Norfolk development in the UK before selling the zone to RWE for £963 million.
This wave of retreats has one central theme: projects conceived under older economic assumptions are now clashing with today’s harsher realities. Most were awarded CfDs or other subsidies when supply chain costs were significantly lower and financing was cheaper. Now, developers are finding that they can no longer deliver on those promises without sacrificing returns or incurring heavy losses.
The Future of Hornsea
Despite the project’s suspension, Ørsted emphasized that it is not walking away entirely. The company still holds critical seabed rights, a grid connection agreement, and a Development Consent Order, which could allow for a reconfigured project down the line.
Hornsea 4 was the next phase in Ørsted’s flagship UK development zone, following the operational Hornsea 1 and 2, and the under-construction Hornsea 3. The firm has a strong track record of bringing in global investment partners such as Brookfield, AXA IM Alts, and Crédit Agricole into these mega-projects. But in the case of Hornsea 4, no amount of financial engineering could bridge the widening gap between projected costs and expected revenues.
A Sector in Search of a New Model
The Hornsea 4 cancellation is not just a blip; it’s emblematic of an industry in transition. As governments raise offshore wind targets in the face of climate imperatives, the economic frameworks underpinning these ambitions are being stress-tested.
Analysts warn that unless procurement mechanisms are adjusted, possibly with more flexible CfDs, inflation indexing, or upfront support for high-risk projects, the pace of offshore wind buildout could slow.
“Ørsted’s retreat from Hornsea 4 sends a clear message,” said one energy consultant. “The era of ‘cheap wind’ is under pressure. It’s time for policy to catch up with economic reality.”
For now, Ørsted appears focused on safeguarding capital and repositioning itself for a more sustainable return on its future offshore investments.
“We’ll seek to develop Hornsea 4 later in a way that is more value-creating,” said Errboe. But when that might happen and under what market conditions remains uncertain.
