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Ahh, this is fun

A quick reading here would deceive:

Danish giant Orsted was among the energy giants who agreed to build new wind-farms that would generate state-backed revenues well below wholesale prices at the time.

“The more power we generate within our own borders, the better protected we will be from volatile gas prices that are pushing up bills,” Kwasi Kwarteng, then business secretary, said.

Less than a year later, however, and that optimism has all but evaporated, with developers warning that rising costs are making planned new projects unviable.

Orsted warned last week that its £8bn Hornsea Three development was no longer viable under the terms agreed with the Government and threatened to mothball the project without tax breaks to offset rising costs.

OK, inflation, bit of a pisser but. Except no, that’s not it:

The guaranteed price is in 2012 money, and is indexed to inflation,

The contracts for difference are inflation linked. They’re complaining about sectoral price changes over and above the general inflation rate:

However, industry leaders now fear that the price is too low, with cost increases outpacing inflation and higher interest rates also damaging investment cases.

Naah, tell ’em to suck it up. Relative prices changing isn’t a government thing. Tough.

4 thoughts on “Ahh, this is fun”

  1. I, of course, would only pay for reliable electricity. If the windmillers couldn’t guarantee to provide power 24 hours a day 7 days a week I wouldn’t be interested.

  2. When we have trouble with people who have contracted to provide energy to us, I just tell reassure them that they don’t have to worry; their surety will take care of it for me. Since the surety will happily bankrupt them in the blink of an eye, it gets their attention.

    No question, there is a surety with deep pockets and aggressive lawyers standing beside Orsted. Hold their feet to the fire – if (relative) prices had changed in their favour you can bet they would pocket the extra profit and consider it a reward for their managerial acumen.

  3. I wonder at what point the govt will tell them to FO. I don’t think we’re there yet, sadly.

  4. A question about “inflation linked”. How do you do that when so much of the pricing you’re linking to has such a large energy cost factor in it? Sounds to me like positive feedback

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