SSE-led consortium to pay £33m after overcharging for curtailment

An SSE-led consortium has been ordered to pay £33.14 million by Ofgem, after it was found to have overcharged for curtailment.

An investigation by the energy regulator found that electricity generator Beatrice Offshore Windfarm Limited (Bowl) breached market rules by charging excessive prices to reduce its generation output when this was required to keep the electricity grid balanced, thereby pushing up costs for consumers.

In Bowl’s view, this was an unintentional breach and it has committed to making changes to its bid pricing policy to avoid any future breaches.

SSE Renewables has the largest share in Bowl (40%), with Red Rock Power having a 25% share in the company and The Renewables Infrastructure Group and Equitix both owning 17.5%.

An 84-turbine wind farm off the North East coast of Scotland, Beatrice is Scotland’s second largest operational offshore wind farm with a total capacity of 588MW.

Costing £2.5 billion to build, Beatrice became fully operational in 2019 and is located around 13.5km from the Caithness coastline.

Ofgem’s review identified the following concerns:

• Bowl’s prices did not properly reflect the financial benefits of reducing its output related to avoided payments that the company would otherwise have been required to make under the Government’s Contracts for Difference scheme.
• Bowl’s approach to setting the part of its prices that was not related to subsidy payments carried a risk of the company recovering more revenue than was necessary to cover the costs incurred as a result of curtailing its output.
• Bowl failed to give meaningful consideration to its compliance with the requirements of the relevant licence condition, or to document the limited consideration that it did give its compliance with these requirements.

While Bowl accepts Ofgem’s findings it maintains that the breach was inadvertent and at the time of submitting the bid prices, it had considered that it was compliant.

A spokesperson for Bowl said: “Bowl accepts that it breached one of its electricity generation licence conditions. The breach was in Bowl’s view wholly unintentional.

“Bowl will make a payment to the Ofgem consumer redress fund, has reviewed its bid pricing policy and fully cooperated with Ofgem throughout to conclude this process.”

The spokesperson added that Bowl is “engaging on proposed modifications to the relevant industry code and Ofgem’s ongoing consultation on its approach to interpreting and enforcing the transmission constraint licence condition”.

The £33.14 million will be paid into Ofgem’s Redress Fund, which provides money to charities to deliver energy related projects that support energy consumers in vulnerable situations.

Ofgem secured £77.2 million in payments from companies into the Redress Fund in 2023 alone.

This is the fifth action that Ofgem has taken against electricity generation companies since the start of 2023 in relation to breaches of this licence condition.

Other cases were:

• Drax Pumped Storage Limited (£6.12 million paid into the Redress Fund)
• SSE Generation Limited (£9.78 million paid into the Redress Fund)
• EP SHB Limited (£23.63 million paid into the Redress Fund)
• Dorenell Windfarm Limited (£5.53 million paid into the Redress Fund)

Last year, the UK spent just under £1 billion in curtailment costs. The annual cost is estimated to rise to more than £3 billion by the end of the decade, before falling when major infrastructure projects unlock bottlenecks on the grid.