When Green Dreams Collide with Reality: Ørsted’s Cancellation of Hornsea 4 and the Offshore Wind Crossroads

In a move that underscores the complexities of scaling renewable energy in a volatile economic landscape, Danish energy giant Ørsted announced the cancellation of its 2.4 GW Hornsea 4 offshore wind farm project in the UK. This decision marks a pivotal moment for the offshore wind sector, revealing the delicate balance between ambitious climate goals and the harsh realities of cost management, supply chain dynamics, and shifting financial priorities.

The Reasons Behind the Cancellation: A Perfect Storm of Challenges

Hornsea 4’s cancellation stems from a combination of factors that even Ørsted’s industry-leading expertise could not fully mitigate:

1. Escalating Supply Chain Costs: Since securing a UK Contract for Difference (CfD) in late 2024, the project faced a 30–40% surge in material and labor expenses due to global supply chain bottlenecks. This included rising prices for steel, cables, and specialized offshore equipment.
2. Higher Financing Costs: Soaring interest rates in 2025 increased the project’s weighted average cost of capital (WACC) by over 2%, eroding its already tight profit margins.
3. Operational Risks: The sheer scale of Hornsea 4—spanning 1,200 sq km of the North Sea—posed execution challenges, including potential delays and technical hurdles in turbine installation.

These pressures pushed the project’s levelized cost of energy (LCOE) above the strike price agreed in its CfD, making it financially unsustainable under Ørsted’s stringent capital allocation framework.

Financial Fallout: A Hit to EBITDA, but a Strategic Retreat?

The cancellation will cost Ørsted €470 million in Q2 2025, primarily from writedowns of transmission assets and contractual cancellation fees. This is a stark contrast to its 2024 EBITDA of €6.8 billion, though the company insists the move preserves long-term value.

Critically, the decision aligns with Ørsted’s stage gate model, which prioritizes early project cancellations to avoid deeper losses. As CEO Mads Nipper stated, “We’re here to build sustainable energy, not unsustainable balance sheets.”

Broader Industry Implications: A Wake-Up Call for Renewables

While Hornsea 4’s cancellation is specific to Ørsted, it highlights systemic challenges across the offshore wind sector:

• Supply Chain Vulnerabilities: RenewableUK estimates that 60% of UK offshore wind projects face delays due to material shortages, with turbine component lead times doubling since 2022.
• Policy Uncertainty: The UK’s delayed reforms on zonal pricing—a system that could reduce grid costs—adds to project uncertainty. A 2025 study by Wood Mackenzie found zonal pricing could reduce LCOE by 15%, but its implementation remains stalled.
• Investor Sentiment: The cancellation may deter capital from late-stage projects without guaranteed cost controls. A recent BloombergNEF survey shows 72% of renewable investors now demand explicit supply chain risk mitigation clauses in project agreements.

The Path Forward: Pragmatism vs. Ambition

Ørsted’s move is not a retreat from the UK market but a recalibration. The company retains development rights for Hornsea 4, aiming to revive it under better conditions—perhaps after 2030 when next-generation floating turbines and lower steel prices could reduce costs. Meanwhile, it is accelerating smaller, modular projects like Dogger Bank C (798 MW), which offer faster returns and lower execution risk.

The industry response has been mixed. While RenewableUK’s Jane Cooper called the cancellation “a wake-up call for systemic reforms,” critics argue that overconcentration on scale risks sidelining innovation.

Conclusion: A Necessary Trade-off with Long-Term Gains

Ørsted’s cancellation of Hornsea 4 is a pragmatic, if painful, decision that underscores the need for discipline in an era of climate ambition and economic turbulence. The €470 million write-down is a fraction of its total market cap (~€45 billion), and its focus on high-margin projects like Borkum Riffgrund 3 (1.4 GW) in Germany signals resilience.

For investors, this serves as a cautionary tale: renewable energy’s growth is not immune to macroeconomic headwinds. Projects like Hornsea 4—though technically feasible—require stable financing, predictable policies, and supply chains. As Ørsted pivots, it bets on a future where smaller, smarter projects and policy clarity will fuel growth. The question remains: Can the industry balance speed with sustainability before the next storm hits?