Analysis: The media lays into ‘rip-off’ wind

Although windfarms account for only 4% of total constraint payments, it is only wind turbines that hit the headlines for getting 'paid to do nothing'. Megan Darby finds out why

Outraged headlines about windfarms being paid to stop generating come around more frequently than turbine blades in a gale.

“Power grid can’t cope when the wind blows,” blustered a typical piece from The Times in August. “Windfarms paid £30 million a year to stand idle because the grid can’t cope with all the energy they produce,” was the Mail Online’s offering a couple of weeks earlier.

The contention of such articles is that wind is a rip-off. It is certainly counter-intuitive to pay not to use a product.

However, National Grid will tell anyone who cares to listen that constraint payments are a ­standard tool to balance the system and make up less than 1 per cent of the bill.

Wind is not even the main beneficiary: in 2012/13, just 4 per cent of the payments went to windfarms, with the rest going to conventional generators. The total cost of constraints was £170 million, of which a mere £7.6 million went to windfarms. The average price paid to wind developers is coming down – at £113/MWh nearly a third lower than in the previous year. Admittedly this is higher than the price paid to conventional plants, which avoid fuel costs and do not require compensation for lost subsidies, but it is still a fraction of the overall costs. So why does this keep cropping up as an anti-wind tale?

Read on and you find the same source for all of these stories: the confusingly named Renewable Energy Foundation (REF). A registered charity that boasted TV presenter and anti-wind campaigner Noel Edmonds as its founding chairman, the REF’s motives seem to be centred on attacking wind. Its blurb states it is “promoting sustainable development for the benefit of the public by means of energy conservation and the use of renewable energy”. However, the occasional supportive noises towards small-scale hydro and biomass aside, its output is dominated by criticism of wind power and green energy costs.

The Guardian reported in May 2011: “Some prominent voices within the industry have long felt that the charity is little more than a front for anti-wind lobbyists.” An REF spokeswoman at the time insisted “it’s unfair to say that we’re anti-wind” and that it researches a range of renewables topics.

The REF publishes a dataset on constraint payments to wind generators, but does not provide equivalent figures for conventional power stations. This is a gift that keeps on giving to journalists at titles with an apparent anti-wind bent.

John Constable, director of the REF, strenuously denies that the organisation’s data is selective. “The compensation for lost income for wind is way in excess of what is reasonable,” he argues. He welcomes the recent reduction in the average price paid to wind, but says it is “still too high” and Ofgem should intervene.

Having noted windfarm payments are only a small part of the picture, the evidence is they are rising. In August, the REF’s data shows windfarm operators reaped £7.7 million – more than in the entire 2012/13 financial year – in compensation for 91GWh they could not sell on the market.

Some of that spike can be attributed to the network struggling to keep up with a fast-growing renewable sector in Scotland. PwC head of regulation, Stuart Cook, says government decided to allow generators to connect before the network was reinforced rather than imperil carbon targets. “Is this a rip-off? It sits uncomfortably paying for nothing, but if this was the cost for early connection of low-carbon generation, it’s probably fine. And the constraints costs have been a lot lower than some of the more pessimistic projections.”

Industry body Scottish Renewables argues that the way to reduce constraint costs is to increase investment in grid infrastructure and electricity storage. Joss Blamire, senior policy manager, says: “Constraint payments are an essential part of meeting electricity supply and demand and for the Renewable Energy Foundation to only focus in isolation on wind power is meaningless.”

Given that sections of the media consistently fail to apply the same scepticism to the REF’s agenda as they do to wind power’s merits, it seems only a matter of time before the story comes around again.

Letter to the editor: Only wind is paid to do nothing

Dear Editor: Utility Week’s article misleadingly implies that generators other than windfarms are routinely “paid to do nothing”. This is incorrect. Unlike wind, conventional generators are not paid extra when constrained off, but instead pay National Grid (because of avoided fuel cost).

The article suggests that in 2012/13, £162 million was paid to all generators not to generate, with only 4 per cent going to wind. However, Utility Week has conflated a) payments to conventional generators to increase output, and b) payments to wind to reduce output. This is confusing.

Furthermore, the article neglects to explain that its constraint cost figure consists of direct costs (including payments to wind) and indirect costs (confidential constraint contracts – some with windfarms, intertrip contracts, and the costs of replacing the constrained-off wind energy beyond a grid constraint). The conclusion that 4 per cent of the payments go to wind is incorrect since the full cost of constraining wind off is necessarily much larger.

Utility Week claims that the £7.7 million (actually £8.2 million) paid to wind power in August 2013 to reduce output was “compensation for the 91GWh they could not sell”. However, wholesale income is not lost; constraint payments (over)compensate for lost subsidy. A Roc was worth £42 in 2012 while the LEC was worth about £5. Consequently, onshore wind in 2012 could defend a compensation rate of £47/MWh. In fact, wind charged an average of £113/MWh.

Average wind constraint prices have fallen to about £88/MWh in the calendar year 2013, but are still significantly higher than the lost subsidy, with a large range from windfarm to windfarm (£72-£200/MWh). This is not in the consumer interest and suggests abuse of market power.

Contrary to the implication of Utility Week, REF has not misrepresented the constraints data. Your simplistic analysis is flawed since it covers up growing volumes of constrained wind energy, excessive wind constraint prices, and the increasing direct and indirect costs of constraining wind.

Dr John Constable (director)
Dr Lee Moroney (principal analyst)
Renewable Energy Foundation

Letter to the editor: The wind constraint problem

Dear Editor: Your recent article gives REF a hard time for its presentation of the constraint payments to wind power, but, as the REF says, there clearly is a problem, particularly with the price per unit charged by windfarms.

Such payments must have been considered before Connect and Manage was introduced, and it would be interesting to see if the outturn figures are in line with these estimates. Logically, if a wind generator decided to go ahead and commission plant before transmission plant was commissioned, it should be prepared to accept being constrained off without payment. Of course, the situation was aggravated by the introduction of Betta, which introduced constraint payments at the Scotland-England border, where previously this had been subject to Interconnector limits.

Unfortunately for the customer, constrained off payments to wind generators are only part of the extra costs borne for the subsidy-driven programme of wind generation. The intermittency and geographical location of wind generation incur extra costs. These include extra operational costs for flexible plant to accommodate variations in wind output, extra transmission capital costs, extra marginal transmission losses, and extra back-up plant to contain the risk to security of supply.

None of this is cheap, and some of the “solutions” to preventing constraints, such as additional network, may be more expensive for the consumer than paying wind to stop generating, even at the high prices currently demanded.

Colin Gibson, power network director 1993-97, National Grid

Letter to the editor: Within this debate – it really is all about balance

Where many other news outlets have failed, Utility Week should be commended for looking beyond the sensationalist headlines and discussing constraints in their entirety – objectively, and taking into account all forms of power generation.

You can’t blame the journalists who have just focused on renewables – it’s an easy story to write. With echoes of the “set aside” farming debate in the 1980s, the thought of windfarms being paid to lie dormant is likely to cause concern. Add in a big number, stripped of any context, and you’ve got a headline fit for any paper with an agenda.

In reality, it’s a lot more complex than that. These payments are needed to balance the grid and are paid to all plant. Payments to thermal generators make a much larger part of the mix, and wind constraint payments made up only 4 per cent of last year’s total.

According to National Grid data, it looks like curtailment payments for wind will rise this year – down in the main to network upgrades and local constraint issues in Scotland. However, the work on these key networks will help alleviate constraints, as would further investment in pumped storage hydro and, looking longer-term, research on electricity storage.

As the broadest based energy company in the UK, with significant interests in all forms of generation, SSE has no particular axe to grind here. Our bottom line is that we would always prefer our windfarms to generate whenever they are able to, but we also recognise that National Grid has a responsibility to balance the network and every generator has a role to play in that. We take this role very seriously.

News outlets also have a role to play, and we hope that Utility Week’s article now leads to a more balanced debate.

David Fernie, director of operations, Energy Portfolio Management, SSE