Swedish power company Vattenfall has halted a 1.4GW UK offshore wind project in the North Sea in a blow to the UK’s renewable energy industry.

The company cited surging costs and “challenging market conditions” as reasons for halting the Boreas project, located off the coast of Norfolk in the east of the UK. According to the company, the offshore wind industry has seen costs increase by up to 40% since last year.

Vattenfall also said it would “investigate the best way forward” for the rest of its Norfolk zone, including the 4.2GW Norfolk Vanguard project. Both Boreas and Vanguard were set to be two of three wind farms in the area, with Boreas being constructed first.

The Boreas decision was announced on Thursday, as part of the company’s interim report for investors for H1 2023.

The UK Government has set a target to install 50GW of offshore wind by 2030, an increase from the current level of 14GW.

“Conditions are extremely challenging across the whole industry right now, with a supply chain squeeze, increasing prices and cost of capital, and fiscal frameworks not reflecting current market realities,” Vattenfall CEO Anna Borg told Power Technology via email.

The Norfolk Boreas project was due to power more than four million UK homes, according to the company. The company first received planning consent for the project in December 2021.

The UK wind industry has warned that increased production costs are putting projects at risk. Rising interest rates have also affected the industry.

Vattenfall was awarded a contract for difference (CfD) by the UK Government in July 2022. The contract guaranteed a rate of £37.35 ($48.09), at 2012 prices, per megawatt-hour of offshore wind electricity production for the first 15 years. The government is currently in the process of awarding the next round of CfDs for renewable energy suppliers.