Earnings from Orsted’s wind and solar assets in operation fell DKK 2.0 billion (£220 million) last year, to DKK 15.0 billion (£1.68 billion), the company said in its annual report.
The wind portfolio benefitted from the 400 MW of new capacity from Hornsea 1. But this was more than offset by significantly lower wind speeds, higher TNUoS tariffs following the divestment of the offshore transmission assets at Walney Extension in mid-2020 and Hornsea 1 in Q1 2021, and operating expenditure on offshore wind farm construction including Hornsea 2.
In contrast, earnings from Orsted’s CHP plants were up by £153 million due to high power and heat generation, higher power prices and higher sales on ancillary services.
The company said in the coming year it expected to record higher wind generation in the UK as wind speeds revert to normal, with the addition of a full year’s generation from Hornsea 1 and the start of operations at Hornsea 2. There would be “less negative impact from the energy crunch but continued negative impact from high balancing and intermittency costs” it said.
Hornsea 2 startup was on-plan up until mid-December, the company said, but “the accelerating Omicron variant infection rates meant that it was not possible to man the vessels used for commissioning work according to plan”. Ramp-up will be later than the company hoped but the company still expects it to be complete in late H1 2022.
Orsted has added ‘Cost inflation and supply chains’ and ‘Offshore power generation’ to its top business risks. It highlighted increasing and more volatile prices for steel and copper in 2021 and said high cost inflation and volatility could have an adverse effect on its earnings as well as its suppliers’ financial position and ability to deliver. Supply chains have also been disrupted by Covid-19, due to local restrictions. To combat cost inflation, it has expanded its hedging programme for steel and other commodities. It has hedged a substantial amount of the steel for foundations that will be delivered in 2022.
Orsted also wants to limit the uncertainty around offshore power generation estimates.
To manage offshore wind forecasting it developed new wake models that capture the influence of turbulence. To ensure correct wind speed estimates, it now uses 24 months of onsite wind measurements prior to bids