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REF Blog

Record UK Wind Farm Constraint Payments of £28m for September 2018

September 2018 has seen the highest monthly payments to wind farms to stop generating since records began in 2010.

Due to levels of wind power in Scotland well in excess of local demand, and grid bottlenecks inhibiting transit within Scotland and export to England and Wales, the UK’s system operator, National Grid, is often left with no alternative but to constrain wind power off the Scottish network.

When wind farms are constrained off they lose the subsidy they would otherwise have received for that energy, and so ask National Grid for compensation. In effect they are paid to stop generating.

In fact, and probably because of their market power, they are able to ask for more in compensation than they lose in subsidy, meaning that they make more when not generating than when selling normally. This anomalous situation has cost the UK consumer £464m since 2010 when the practice began, with 2017 being a record year when costs to consumers rose to £108.25m.

Windfarm constraint payments so far in 2018 amount to £78.6m, with £28.4m of that total being paid in September alone, an all-time record for a single month.

Though a record in scale, this September’s constraint payments were typical, in that average Scottish onshore wind farm earnings were £72/MWh constrained off, with prices ranging from £63 to £118 per MWh. This represents a range of £13 to £73 per MWh in excess of the subsidy income forgone when wind farms are instructed to reduce output.

This excess compensation means that wind farms in Scotland earn more on average per unit generated, creating a perverse incentive for wind farms to be located in Scotland, and on the further side of grid constraints.

No one should be under any illusion of the scale of the problem. Whitelee and its Extension, near Glasgow, have taken £91.8m in constraints since 2010, making it the highest earner. The recipient of the second highest total of constraints is Clyde Wind Farm which has taken £59.3m since 2012, followed by Fallago Rig Wind Farm, at £30.7m since 2013.

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Weekend constraint payments record

Constraint payments to wind farms in the United Kingdom totalled £7.12m over the weekend, 28–29 July 2018, making it the most expensive weekend to date and well above the previous record of £5.87m for 24-25 June 2017. Constraints on Saturday the 28th of July amounted to £4.41m, and on Sunday the 29th to £2.71m.

 

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Interconnector problems mean wind farm constraint payments continue

Over the last few days REF has been delving into the wind constraint payments data to assist an investigation by the Scotsman newspaper into ongoing problems with the Western Link HVDC Interconnector, a 2.2 GW, £1 billion subsea cable from Hunterston to Deeside expressly built to carry Scottish renewable electricity to English and Welsh consumers.

 

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Early Rooftop Solar PV Adopters Get Lion’s Share of the FiT Subsidy

As is well known, the generous subsidies given initially to small scale solar PV under the UK Feed-in Tariff resulted in unexpectedly high levels of adoption. Government quickly reduced subsidies for new installations, but did not feel able to retrospectively cut the arguably excessive support for early adopters. Consequently, even today, in 2017, nearly one quarter of the total annual cost of the scheme is being paid to the small-scale rooftop panels erected in the first two years of the scheme, 2010–2012.

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The Total Cost of Subsidies to Renewable Electricity in the United Kingdom: 2002–2016

REF is often asked about the total cost of public support to renewable electricity generators, both annually and since the subsidies began.

The following table gives aggregate figures for the administrative years 2002–2003 to 2015–2016. Administrative years run from the 1 April to 31 March the following year.

Year RO (£m) FiT (£m) Total (£m)
2002-2003 278 278
2003-2004 416 416
2004-2005 495 495
2005-2006 583 583
2006-2007 719 719
2007-2008 876 876
2008-2009 1,036 1,036
2009-2010 1,119 1,119
2010-2011 1,285 14 1,300
2011-2012 1,458 151 1,608
2012-2013 1,991 506 2,498
2013-2014 2,599 691 3,290
2014-2015 3,114 866 3,980
2015-2016 3,743 1,110 4,853
Total (£m) 19,818 3,338 23,156
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Santa's Christmas present for wind farms

Over the Christmas period, high winds accompanying Storms Barbara and Conor combined with low demand for electricity to deliver a £7 million gift to the owners of wind farms in the form of constraint payments. Constraint payments occur when wind farms are paid not to generate, usually in periods when wind generation is surplus to demand. The bulk of these payments are made when wind generation cannot be used in Scotland, and there is insufficient grid capacity to export the energy to England. The cost of these payments is borne by electricity bill payers throughout the United Kingdom.

The peak payments over the current holiday season were made on Christmas Day, as summarised in the following table drawn from the REF datasets:

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Renewables planning activity in the last six months

As regular users of the REF datasets will know, our EU Target Tracker is updated monthly and based on the government’s Renewable Energy Planning Database (REPD). This month’s update has just been released, and merits a general comment.

As a rule, the totals change little month on month, with the major trends only being visible over longer timescales. Focus on the short term and net changes is a mistake. It is only by studying the changes at the individual planning application level over 6 months or longer that we can see the major trends and the impacts of changes in government policy.

To that end, we have compared the detailed planning data released for April 2016 with that released this week for November 2016. We looked at how many new applications have been submitted in the last half year, how many abandoned, how many were granted or refused planning permission, how many appealed by the developers, and how many have begun construction and operation. Predictably, 80-90% of the activity involves onshore wind, solar photovoltaic and offshore wind.

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New wind farm constrained off grid within days of opening

UPDATED 22 November 2016: SEE POSTSCRIPT BELOW

On the 28th of October, Falk Renewables announced that its newest wind power station, Assell Valley Wind Farm in Ayrshire, had begun generating

Two weeks later, on the 11th of November, Assell Valley wind farm had to reduce output on instruction from National Grid in order to cope with the on-going problem of Scottish wind farms generating surplus electricity which can neither be used in Scotland, because of low demand, nor exported to England because of the limited interconnector capacity between the two countries.

Assell Valley wind farm charged £76/MWh to reduce output, which is approximately twice the subsidy income foregone when the wind farm is constrained off. Further constraint bids from this wind farm were accepted on the 12th and 16th of November at the same price. At the time of this blog (21 November 2016) the total income from constraints to stop generating for this new wind farm amounted to just under £10,000.

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Government Data on Renewable Energy Development is Inconsistent and Unreliable

There are significant inconsistencies between the various sources of Government data on renewable energy deployment which undermine confidence in claims regarding progress towards 2020 targets and firm control of subsidy costs to the consumer. For example, the government’s Renewable Energy Planning Database (REPD) is the principal source for estimates of progress and probable future cost, but is inconsistent with five other data sources published by government, and also with estimates made by National Grid. What cannot be measured accurately cannot be managed adequately. Government needs to get a grip.

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The Increasing Cost of CO2 Emissions Reductions in the United Kingdom

A reduction in the use of coal and a rise of gas for generating electricity has slashed the UK grid emissions factor to around 0.26 tonnes of CO2 per MWh.  This has the economic consequence of increasing the subsidy cost of saving emissions through increased use of renewables.  It now costs around £169 to save a tonne of CO2 through use of onshore wind, and £267 for offshore wind. This is 6-10 times the estimated cost of environmental damage caused by a tonne of emitted CO2 and demonstrates how expensive and ineffective the UK renewables policy is in abating greenhouse gas emissions.

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