The Xlinks Morocco-United Kingdom Power Project, designed to produce carbon-free electricity to over 7 million British homes, has experienced a significant surge in cost.
Xlinks First, the investment firm spearheading the Project, announced that “the project’s delivery cost has risen to £22-24 billion ($27-30 billion),” up from the previous estimate of around £20 billion.
It also mentioned that the projected strike price for the plan now ranges between £70-80 per megawatt-hour (MWh), based on 2012 pricing.
This update was shared in a recent note, titled “Xlinks First Updates Guidance on Construction Costs and Strike Price for Morocco-UK Power Project,” on Tuesday on Xlinks’ official website.
The company attributed the cost increase to “significant upward pressure on the cost of all energy projects.”
“Our new guidance on the Morocco—UK Power Project strike price is broadly in line with what we are seeing in the wider market and is caused by the impact of macroeconomic factors,” commented James Humfrey, CEO of Xlinks First.
He mentioned that the company continues to raise the private capital needed to deliver the project,” noting that they are “in constructive dialogue with key stakeholders, including the UK’s Department for Energy Security and Net Zero.”
Speaking of the impact of macroeconomic factors, the British company highlighted on its website that approximately 60% of the change in the project’s costs can be attributed to the impact of global events on the supply chain.
This surge is propelled by “a myriad of factors, such as widespread increases in raw material and energy expenses, along with a global rise in demand for renewables.”
The same source says the remaining 40% is attributed to direct macroeconomic effects, with interest rates being the main contributor to this alteration.
The note highlighted that “while Xlinks First continues to optimize the Project as it progresses, the impact of these efforts has been de minimis compared to the effect of macroeconomic changes.”
The first-of-its-kind project aims to lay 3,800 kilometers of undersea cables by 2030 to deliver solar and wind energy from the Moroccan Sahara to the UK.
It is expected to generate 10.5 gigawatts of carbon-free electricity to provide 3.6 gigawatts of reliable energy for more than 20 hours a day on average, meeting 8% of Britain’s electricity needs.
