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‘Ding-DONG! Another Wake-Up Call for Wind Enthusiasts’

It wasn’t easy growing up being called DONG, so in 2017, the world-leading offshore wind farm developer changed its name to Orsted, alluding to the famous Danish electrical scientist. Today the company formerly known as DONG announced another $4billion impairment to its US offshore wind assets and said it would cease development of two projects off the coast of New Jersey: Ocean Wind 1 and Ocean Wind 2. This comes after the Danish utility already announced in August a $2.3bn write-down in the value of its North American business. Its shares fell another 22% in early trading and are now down 80% from the December 2020 peak.  This profit warning should be yet another wake-up call to wind enthusiasts currently still in denial. 

Ocean Wind 1 was awarded in 2019 as a 1.1GW project based on a 20-year OREC (Offshore Renewable Energy Certificate) at a 2025 price of $98 per MWh with a 2% annual escalator. As recently as January 2023, it was announced that the Public Service Enterprise Group (PSEG) had sold their 25% minority stake in the project to Orsted for an undisclosed sum. Ocean Wind 2 was awarded a 20-year OREC (Offshore Renewable Energy Certificate) for the proposed 1.1 GW offshore wind farm at a 2029 price of $84 per MWh with a 2% annual escalator. 

Orsted says that building the projects would now not be profitable, claiming costs have risen because of supply chain issues and interest rates. We find it curious that Orsted has not yet impaired the value of its European or Taiwanese projects, where profitability is surely affected by the same global issues. 

Orsted also says it must now take actions to improve its capital structure and strengthen its balance sheet. If the company is to maintain its growth ambitions, we believe this would involve selling its most profitable assets with an issue of new shares supported by the Danish state which owns just over 50% of the equity.  

It is somewhat ironic that an industry that receives so much economic support in the form of government subsidies, tax breaks and coercion (with carbon-taxes making gas generation less competitive) still cannot generate adequate profits for its investors and ends up also having to be rescued by government, funded by higher electricity bills and taxes. Wind is an unsustainable economic rent seeking parasitical industry, a fact that is masked by its virtue seeking.  

In view of Orsted deciding that projects where power generation is guaranteed to be sold at $98 (£81) per MWh and $84 (£69) per MWh is deemed no longer profitable, the viability of other offshore windfarms contracted at similar or inferior prices must also be called into question. 

We do not believe that Orsted will build the massive 2.85 GW Hornsea 3 it “won” in 2022 at a headline price of £37 MWh (£45 MWh adjusted for inflation escalation) and we question whether any of the UK offshore wind projects built on post-2017 CFD’s of sub-£100 will produce a return for investors. Indeed, the miraculous drop in UK CFD prices from 2017 – which vainglorious wind enthusiasts wrongly claimed made wind the “cheapest” form of power generation – is now like all miracles inexplicable. 

Unfortunately, it is the consumer who pays with exponentially rising prices for electricity because of wind company management getting their sums wrong with UK politicians having been conned into believing that wind was “cheap” and already betting Britain’s economic future solely on offshore wind, with plans to build 50 GW (another 36 GW) of generation capacity by 2030. 

Orsted already boasts of “engaging” with the UK Labour Party opposition, presumably in a shabby backroom bailout, to increase CFD guaranteed power prices, not because wind is a useful economic product but instead in order that ideological “Net Zero” targets can be met, handing wind farms operators like Orsted a blank cheque funded by the British consumer. 

Irrespective of the cost of generation, it is a fatal conceit to suggest that wind power has the same value to the electricity grid as dispatchable power on demand. Through the government guaranteeing a power price based on this delusion, wind operators are incentivised to ramp-up production of an increasingly economically useless product, paid for by the UK consumer, with the exponential costs of intermittency crippling the British economy. 


Barry Norris
Argonaut Capital
November 2023


For further wind industry analysis and research please see our recent blog and Stockumentary video: Britain’s A Goner With The Wind