Last weekend the Italian cable manufacturing company, Prysmian, released a statement announcing to the markets that the Western Link High Voltage Direct Current (HVDC) interconnector between Hunterston and Deeside had failed again, on the 10th of January. This grid link, which is a joint venture between Scottish Power Transmission (SPT) and National Grid (NG), employs cables manufactured by Prysmian.
This £1 billion project has a peak transit capacity of 2.25 GW and was designed solely to facilitate the export of Scottish wind power to the English and Welsh markets. In doing so it was expected to reduce constraint payments to wind power, payments which amount to £630m since 2010, with a record £130 million in 2019 alone.
The project was expected to come online at the end of 2015 but in fact did not become fully operational until late 2018 and has been plagued with faults ever since.
The interconnector may have reduced the rate at which constraint payments are increasing but it has not reduced the total payments. Hopes that this situation might improve in 2020, with the interconnector now in full operation, have been dashed by this latest failure. Unsurprisingly, there has been an increase in constraint payments after the most recent fault, though they were already high when the failure occurred. Payments this month so far amount to £21 million, a record for January, and the sixth highest monthly total on record.
Furthermore, and in spite of the presence of the interconnector, the prices paid to constrain wind off the network have not fallen, and remain greatly in excess of the income lost, undermining the claim that they are fair compensation. A reasonable person observing that the prices asked for by wind farm owners vary between 20% and 80% in excess of lost income will conclude that this is an indication of profit taking and an exercise of market power, and will think it remarkable that the regulator has not intervened.
This story has been covered in the Scottish press (Times, Daily Mail, Daily Record) and on STV television news. But it is now becoming a national story, with growing concern that decisions taken by the Scottish government are causing highly significant increases in consumer costs to households and businesses in England and Wales. The Sunday Telegraph has this weekend (19.01.20) published a detailed account: Wind farms paid up to £3 million per day to switch off turbines.
The Telegraph story also reports that Lord Ridley has submitted three written Parliamentary Questions (PQs) to the Department of Business, Energy and Industrial Strategy (BEIS). Her Majesty’s Government is required to answer within a reasonable period of time.
To ask Her Majesty's Government what annual standing charge on the consumer has been permitted by Ofgem to the owners of the Western Link interconnector between Hunterston and Deeside; and for how many years that charge has been permitted.
To ask Her Majesty's Government what plans they have, if any, to require Ofgem to publish the calculations behind the approved rate of return allowed to the owners of the Western Link interconnector.
To ask Her Majesty's Government what plans they have, if any, to investigate the late delivery of the Western Link interconnector; and whether negligence in construction or operation of that interconnector may expose consumers to additional costs.
These questions highlight the important and often neglected fact that grid reinforcement or expansion for any reason, to reduce constraint payments for example, is not itself free, and that expensive assets such as the Western Link imply an increased standing charge on the consumer through Balancing Services Use of System (BSUoS) charges, charges which are ultimately passed through to bills. The additional costs arising from the Western Link are unlikely to be small, and may even mean that this interconnector is far from good value for money. Does the Western Link result in a healthy net saving to consumers? No one at present knows, but the answers to Lord Ridley’s questions may shed some light on this matter.
In the meantime, it is clear that the Westminster and Holyrood governments must take joint action to prevent companies from profiting from weaknesses in the grid resulting in constraint payments to their wind farms.
Firstly, Holyrood should as a matter of urgency impose a moratorium on further wind farm consents, and if it will not do so voluntarily, Westminster must intervene to protect the interests of English and Welsh consumers.
Secondly, the regulator, Ofgem, should investigate the potential conflict of interest affecting two of the largest wind farm developers and recipients of constraint payments, Scottish Power and SSE. These two companies also divide ownership of the Scottish grid network between them, with each being a monopoly within its respective area. There is consequently a clear potential conflict of interest since these companies probably understand the network weaknesses better than any other party, and siting new wind farms in areas already subject to grid constraints would send out the wrong signals. The high constraint payments received by Scottish Power and SSE, over the last few days for example (see Table 1 below), give ground for concern, and underline the need for detailed inspection by the regulator.
Table 1: Constraint Payments to Wind farm owners in Scotland since Western Link HVDC trip on the 10th January (11-January-2020 to 18-January-2020, incl). The range in premium paid over average subsidy reflects the different prices for different wind farms and their different ROC banding. A ROC price of £55 per MWh is assumed. Source: Balancing Mechanism and REF data.
| Owner | Constraint Payments (£ millions) | MWh | Number Wind Farms | % Premium paid over average subsidy forgone |
| Scottish Power | £5.62 | 83,157 | 14 | 24% - 42% |
| Greencoat & SSE | £4.68 | 67,706 | 10 | 18% - 42% |
| EdF | £0.87 | 12,185 | 3 | 27% - 48% |
| Ventient Energy | £0.58 | 8,274 | 5 | 27% - 51% |
| Eneco | £0.33 | 4,503 | 4 | 36% - 52% |
| Falck | £0.21 | 2,689 | 4 | 42% - 60% |
| FredOlsen | £0.17 | 1,974 | 5 | 56% - 74% |
| Vattenfall | £0.12 | 1,496 | 2 | 47% - 56% |
| Statkraft & Partners | £0.08 | 957 | 2 | 51% - 54% |
| Community Windpower | £0.07 | 800 | 2 | 72% |
| GIB | £0.02 | 256 | 1 | 49% |
Thirdly, the Westminster government should instruct Ofgem to intervene and at the very least cut constraint payments to no more than the income lost. Indeed, it is arguable that because grid constraints were an entirely foreseeable commercial risk no compensation should be available. This would deliver immediate relief to the consumer and focus minds in an increasingly overheated Scottish wind farm industry.