Over the last few years, we heard a lot about how the giant turbines that dominate hillsides and coastlines across Britain and Europe would power a new era of prosperity. They will generate an endless supply of cheap, environmentally friendly energy. They will create hundreds of thousands of ‘well-paid green jobs’. And the countries that embraced it would become the technological leaders of the 21st century. Indeed, the former prime minister Boris Johnson promised to turn the UK into the ‘Saudi Arabia of wind’.
And yet, the outlook for the wind power industry currently looks far from secure. Today, Orsted, the Danish giant of the industry, has been forced into what is effectively a state-funded bailout. Has the wind has been knocked out of wind power?
Britain has made a huge bet on wind power as a core part of both its industrial and energy strategy
It has been a bad day for Orsted shareholders. The company’s shares were down 28 per cent as it announced a rights issue to raise $9.4 billion (£7 billion) of fresh capital and they are now down by 47 per cent over the last year. The Danish government, which owns half the company, will put up its share of the money, meaning that, in effect, this is a taxpayer-funded rescue. Its immediate challenge is President Trump’s decision to cancel wind farm developments in the United States. But Orsted has been struggling for the last year with rising costs and disruption to supply chains.
As the Bloomberg energy expert Javier Blas put it, ‘the problem with this company is that historically its leadership has been …building at “any costs” GW of wind power, rather than “profitable” GW wind power’. In other words, wind power that actually makes money is tricky.
Britain will be particularly badly impacted by this. Orsted is a major player in the UK renewable energy industry. It has already pulled out of the massive Hornsea 4 wind farm in the North Sea, and it is now looking to sell Hornsea 3 as well, although it is unlikely there will be many offers.
Of course, companies run into trouble all the time. And yet, when it comes to wind power, it is not just Orsted. Siemens Energy, another giant of the European industry, has also run into losses on its wind unit.
There is a wider point to be made here than just the struggles of one business. Wind power was fine so long as there were unlimited subsidies on offer from the government. Once the industry is expected to deliver energy at reasonable prices, wind power no longer looks nearly as attractive.
Britain has made a huge bet on wind power as a core part of both its industrial and energy strategy. It is starting to look as if that wager could go horribly wrong – and it may be too late to change course.
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