Renewable Energy Foundation

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:

Table 1: Constraint payments made to wind farms over the Christmas holiday period 2016

The big earning companies were Scottish Power (SP) and Scottish and Southern Electricity (SSE) which made £3.5 million and £2.5 million respectively over this period.  Whitelee (owned by SP) and Clyde (SSE) were the most heavily constrained taking £1.9 million and £1.2 million respectively, but 35 wind farms in total shared in the windfall, as recorded in the following table:

Table 2: Constraint payments to wind farms over the period 22 December - 26 December 2016. Offshore wind farms are in italics.

Several wind farm companies have increased the prices they charge to reduce wind farm output during 2016. For example, the price for Clyde wind farm was increased by nearly £3 per MWh on 13 December 2016 to £69. The price charged is to compensate for the subsidy forgone when a wind farm is constrained off the grid; this is currently £45 per MWh, so the payments actually exceed by a large margin the income lost, meaning that wind farms actually make more money when they are constrained off the system than when they are generating normally. For example, the owners of Clyde are claiming an extra £24 per MWh for unexplained reasons and £3 of this rise occurred just prior to the Christmas storms.

There are now 52 wind farms in the United Kingdom that receive constraint payments; 37 are onshore, all of which are located in Scotland. To date, these wind farms have received a total of over £274 million from electricity bill payers for not generating. Large scale deployment of wind farms in the area of greatest constraints continues apace. The justification for the prices charged for reducing output remains opaque and while this is the case the opportunity for exploitative pricing continues. REF has consistently argued since we first revealed the constraint payments that the compensation to wind farms should be capped by the regulator at the subsidy income lost.