Energy and Natural Resources

Dong Tapped to Build Offshore Wind Farm

12 September 2017

The UK government awarded a contract to Dong Energy to build the 1,386 megawatt-capacity Hornsea Project Two windfarm in the North Sea, some 90 kilometers off the Yorkshire coast. The farm will surpass Dong’s 1,200 MW Hornsea Project One to become one of the biggest offshore windfarms.

The project is expected to enter service in 2022 and support up to 130 jobs during its lifetime of up to 25 years.

The contract equates to a cost of £57.50 per MWh ($76.19), around half the cost of allocations made two years ago. Larger projects, bigger turbines and better cables are all driving down the price of wind energy, says Dong UK managing director Matthew Wright.

The cost per megawatt-hour reportedly is lower than prices for nuclear energy. The “strike price” for the Hinkley Point C power station in Somerset is set at £92.50 per MWh.

Dong says that key cost-drivers enabling the bid for Hornsea Project Two are:

Scale: DONG Energy's pipeline of construction projects across the UK (Race Bank and Walney Extension in 2018, Hornsea Project One in 2020 and Hornsea Project Two in 2022) creates economies of scale.

Risk reduction: DONG Energy has several years of experience from developing Hornsea Project One in the North Sea, which it says helps it reduce construction and operation risk.

Synergies: Operations and maintenance on both Hornsea projects will be conducted from DONG Energy's hub in Grimsby, which also serves other DONG Energy offshore wind farms on the UK east coast.

Maturing industry and technology: Innovation of offshore wind turbines, new installation equipment and methods, continuous improvements of foundation design, improved cables with higher capacity, and a growing and competitive supply chain.

The Contract for Difference is a 15-year contract that will be indexed for inflation. After 15 years, Hornsea Project Two will receive the market price for electricity.

The Hornsea Project Two scope will also include construction of offshore and onshore substations and the transmission cable connecting the turbines to the onshore substation. These assets are expected to be sold to an offshore transmission licensee after they are built.

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