The world’s largest offshore wind developer, Orsted, has warned that its wind farms will produce less power than expected in what it suggested was an “industry-wide” issue. The Danish energy company on Tuesday said a new assessment of its wind projects had prompted it to update its modelling and reduce its power production forecasts, sending its shares down 7 per cent. As a result Orsted cut its forecast rate of return for seven of its largest offshore wind projects under construction, reducing the lifecycle internal rate of return for these projects from about 8 per cent to about 7.5 per cent. “We do see a couple of effects that we believe will have more of a negative drag on production than we forecast,” said Henrik Poulsen, chief executive of Orsted, calling the change in guidance a “relatively small adjustment”. We have never been more optimistic about the growth prospects of offshore wind as we are now Henrik Poulsen, chief executive of Orsted Wind turbines block each other’s wind — known as the “wake” effect — and that wind slows down as it approaches wind turbines and wind farms — known as the “blockage” effect. The assessment found that these two factors had been historically underestimated; and that the issue of the wind “wake” effect is likely to intensify as more offshore wind farms are built. “It is most likely an industry-wide issue,” said Mr Poulsen. Orsted’s reduced production forecast is set to ricochet through the industry, which has been facing slender margins as governments shift from generous subsidy regimes, to intensely competitive auction-based systems. Orsted also announced a new set of cost control measures, including an unspecified reduction in jobs. “Renewable energy is an industry characterised by intense competition and therefore it is always incumbent upon us to look for opportunities for us to remain an efficient developer,” said Mr Poulsen. Orsted, formerly known as Dong, or Danish Oil and Natural Gas, was the first energy company to dump its oil and gas business and make a decisive shift toward renewables. It is now the biggest developer of offshore wind projects in the world.

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