UK spent just under £1bn in curtailment costs last year

A record £920 million was added to customer bills last year to cover the costs of curtailment, according to analysis from renewable energy developer Field.

The developer is calling on the government, Ofgem and the Electricity System Operator (ESO) to “get behind” reforms which it claims will dramatically cut curtailment costs.

In particular, Field claims that using battery storage more effectively could slash the annual cost of curtailment by as much as 80%.

The £920 million spent in 2023 is a 15% increase on the £800 million spent on curtailment costs in 2022 and is more than 80% higher than the £507 million spent two years ago. (Previous annual figures supplied by Carbon Tracker).

In line with previous years, Field estimates that around three-quarters of the annual cost was spent paying gas stations to increase outputs after wind power generation was turned off due to bottlenecks in the transmission system.

Amit Gudka, Field chief executive, said that more strategic use of batteries would be much easier to implement and have a greater impact on curtailment costs than introducing “disruptive” mechanisms such as zonal pricing, which the government is exploring as part of its ongoing review of electricity market arrangements (REMA).

“In an era where energy bills remain high and carbon emissions keep rising, it’s alarming that we’re wasting clean, cheap, abundant energy on a daily basis. As our analysis suggests, this problem is getting worse, not better,” Gudka added.

“Billions of pounds have been earmarked to upgrade the transmission network, but we think there’s a better route here than overspending on this one approach to upgrading the electricity system.

“More efficient use of established technologies, such as battery storage, would dramatically reduce curtailment costs and network investment needs. It would also reduce the need for expensive, complex and disruptive market-based mechanisms such as zonal pricing.”

Field’s analysis predicts that without intervention, annual curtailment costs could reach £3.5 billion by 2030.

It adds that “the majority of [2023’s] cost was down to a single pinch point in the UK’s electricity grid on the Scottish/English border called the B6 boundary” and warns that this boundary constraint could alone cause up to £2.2 billion of curtailment costs by 2030.

Field’s analysis also reveals that wind farms in Scotland are being curtailed 40% of the time, while transmission capacity across key boundaries in the UK, including the B6 boundary, “rarely has more than a 50% utilisation rate, further restricting the flow of electricity”.

However, the developer claims that those costs could be cut by as much as 80% “if existing technologies like battery storage are used more effectively on the current grid”.

It adds that “increasing the amount of ‘intertrip services’ the system operator can buy and using ‘Grid Booster’ batteries would both contribute to tackling the problem”.

To address the specific curtailment problem caused by the B6 boundary, Field recommends building 10GW of energy storage.

Gudka added: “As well as grid investment increases, battery storage can play a critical role in reducing the cost of managing the energy system and preventing households from paying to waste energy.

“Storing cleaner energy, to then use it when and where it’s needed the most, will help us run our grid more efficiently and more cheaply – helping us bolster the UK’s energy security and achieve a net zero power sector by 2035.

“What we need now is the National Energy System Operator, Ofgem and the government quickly getting behind and prioritising the innovative ideas that have been proposed by the industry.”

Field’s calls follow warnings from the UK’s largest battery storage fund that investment in the sector is at risk because the way the country’s electricity system is run means the technology is not used widely enough.

Ben Guest, managing director at Gresham House, said National Grid ESO is underusing battery storage that is already incorporated in the system.

A Department for Energy Security and Net Zero spokesperson said: “The UK is a world leader in technologies such as electricity battery storage and we are removing regulatory barriers to help storage companies enter the market, which could save consumers up to £10 billion per year by 2050.

“We estimate that 18GW of batteries have secured agreements to be operational by 2028, which represents nearly a fivefold increase on the capacity deployed today.

“We’re also driving forward the biggest reforms to our electricity grid since the 1950s – halving the time it takes to build networks, speeding up grid connections, supporting thousands of jobs and reducing bills in the long-term for families.”

Almost 85GW of battery storage projects are now operational, under construction, consented or in planning or development, according to figures released by Renewable UK at the end of 2023.

The trade body said the pipeline has swelled by more than two-thirds over the last year from 50.3GW to 84.8GW. This includes 3.5GW of operational battery storage and 3.8GW that is under construction. A further 24.5GW of projects are consented and 27.4GW are currently seeking planning permission. There are also 25.7GW of projects in pre-planning development.

The Energy Networks Association previously revealed that battery storage projects also account for 29% – or 159GW – of the connection queue for the power grid.

The ballooning level of payments renewables generators receive to constrain their output was described as a “landmine” by the House of Commons energy security and net zero committee chair Angus MacNeil earlier this year, who warned that it could explode like the Post Office scandal.

He added: “[Constraint payment] will bubble up at some point because there’s a lot of money going for nothing.

“People are going to look at it and ask what they are getting for this money. There’s going to be a demand to do something: paying something for nothing isn’t going to wash.

“Giving money for nothing is really going to stick in the craw.”