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DONG's Hornsea Two cost cut in half

Written by  Tuesday, 12 September 2017 08:40

DONG Energy will build its Hornsea Project Two wind farm at the lowest-ever price for offshore wind in the UK, cutting its original price by half, in what the company is calling a "breakthough moment."

Map of Hornsea 2, from DONG.

At about US$76 (GBP 57.50)/MWh, the strike price for the contract for difference (CfD) is 50% lower than the previous round of CfD allocations just two years ago, demonstrating the rapid reduction in cost across the industry, DONG says.

Hornsea Two is set to become the world’s largest wind farm, surpassing its predecessor the 1200MW Hornsea One, which DONG energy is currently building.

Hornsea Two will have the capacity of 1386 MW, enough to power more than 1.3 million homes. It will be built 89km from the Yorkshire coast and is expected to be operational from 2022 with 25-year lifetime expectancy.

Hornsea Project Two will contribute significantly to DONG Energy’s ambition of reaching a total offshore wind capacity of 11-12 GW by 2025, the company says.

The Cfd is a 15-year contract that will be indexed for inflation. After 15 years, Hornsea Two will receive the market price for electricity. The project will be operated from DONG Energy's new operations hub in Grimsby, which is to be the largest facility of its kind in the UK when built.

With the allocation of the CfD, DONG Energy says it has now taken a final investment decision on Hornsea Project Two.

“We’re delighted to be awarded a Contract for Difference for Hornsea Project Two, which is another important step towards fulfilling our vision of making offshore wind the most competitive form of electricity generation,” says Samuel Leupold, executive VP and CEO of Wind Power at DONG Energy. “We have always promoted size as a key driver for cost. The ideal size of an offshore wind farm is 800-1500 MW, and therefore it is natural that Hornsea Project Two will deliver record-low costs to society. At the same time, the low strike price demonstrates the cost saving potential of developer-built offshore grid connections, which in the UK is included in the project scope.”

The project is expected to support more than 2000 during its construction phase with up to a further 130 permanent jobs for the operational phase of up to 25 years.

“This is a breakthrough moment for offshore wind in the UK and a massive step forward for the industry. Not only will Hornsea Project Two provide low cost, clean energy to the UK, it will also deliver high quality jobs and another huge boost to the UK supply chain,” says Matthew Wright, managing director for DONG Energy UK. “Costs are falling rapidly, long-term and highly-skilled jobs are being created across the North of England and the UK supply chain is going from strength to strength. We’re now really seeing the benefits of this commitment to offshore wind and there is still so much more to come. Indeed, it has the potential to play a key part in the realization of the UK’s industrial strategy.”

DONG Energy is already constructing Hornsea Project One and has started the consultation process for Hornsea Project Three, underlining the huge potential of this area of the North Sea for offshore wind. 

Cost drivers enabling the bid for Hornsea Two include scale, risk reduction, synergies, and mature industry and technology.

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