The Real Story Behind Wind Farm Constraint Payments

By Paul Homewood

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https://www.telegraph.co.uk/news/2019/08/16/compensation-payouts-wind-farms-soar-telegraph-can-reveal/

 

One common defence of the obscene amounts paid to wind farms to cut output is that these constraint payments are made to all types of generators.

This is grossly misleading. As the REF show, constraint payments for wind farms have risen from virtually nothing a decade ago to £124 million last year, purely because of the intermittency of wind and solar power.

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https://www.ref.org.uk/constraints/indextotals.php

 

Of last year’s £124 million, £115 million alone went to Scottish wind farms, according to the REF, because of the lack of enough transmission capacity to take surplus wind power into England, where the demand is.

With offshore wind capacity now just beginning to rapidly expand in England, we can expect these payments to drastically rise. According to the Telegraph:

Ben Guest, a specialist in renewable energy companies and markets at asset management firm Gresham House, said compensation could even rise to £1 billion a year – nearly six times last year’s payout – in the foreseeable future.

“The amount of power delivered by renewables in the coming years is going to result in far larger amounts of over-supply than you see today,” he said.

It is anticipated that power generated by renewable energy could increase by up to 50 per cent over the next five to ten years as more wind farms are established, many set up to take advantage of generous government subsidies.

https://www.telegraph.co.uk/news/2019/08/16/compensation-payouts-wind-farms-soar-telegraph-can-reveal/

 

To make matters worse, these constraint payments are not just for the value of electricity that would have been produced, but include the subsidies foregone as well. This year, for instance, the payments average £70/MWh.

The National Grid has an array of tools for ensuring that demand and supply is balanced. These are known as Balancing Services Use of System (BSUoS), and cost in the region of £1bn a year.

A large proportion of this cost is designed to ensure there is plenty of reserve capacity available. However constraint payments are now growing rapidly as a share.

The reason is simple. Before intermittent wind and solar power came on board, the National Grid merely had to estimate what demand would be for a certain time on a given day, then arrange that there would be sufficient capacity available.

Now, as well as estimating demand, they have to forecast how much generation there will be from renewables. Inevitably there will be times when there is too much output, and constraint payments are wheeled out. The alternative is of course even worse, that they overestimate.

 

An interesting case study that shines a light on this occurred last weekend, Aug 10th and 11th. This was when the Telegraph reported that Hornsea wind farm was paid £100,000 to switch off, just a day after they triggered the black out.

 

The National Grid publish their BSUoS charges for each half hour here. So far this financial year, these have averaged £1.9 million a day. As I say, these include costs for reserves as well as constraints.

On Aug 10th and 11th, these increased to £5.5 million and £4.1 million respectively. Moreover, the bulk of these payments were made between midnight and 7.00 am , when demand was lowest.

Both days were extremely windy, and certainly demand was low, so it is reasonable to assume that most of these costs related to constraint payments for wind farms.

 

BM Reports for those two days show (circled) the drop in demand in the early hours. They also show the volatility of wind power over the two days.

 

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 https://www.bmreports.com/bmrs/?q=generation/fueltype/current

Wind power was running at well above 8MW for much of that period, around 40% and more of total generation. It is pretty clear that the National Grid rightly believed that such a high reliance on wind power was far too risky.

Meanwhile nuclear was generating flat out at 6GW, with gas and biomass at about 5GW.

If they had not constrained a dollop of wind power, the grid would have been far too reliant on the wholly unreliable wind power, thus risking another major blackout.

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August 18, 2019 at 03:57PM

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