In 2022, REF highlighted the fact that so-called ‘unsubsidised’ wind farms were charging to reduce generation during periods of grid constraint (“Why are ‘Unsubsidised’ Wind Farms Receiving Constraint Payments?”)
We could see no justification for wind farms that are not losing income when constrained to charge for any reduction in output. Their commercial position is not harmed, and therefore the constraint payment represents additional and unearned income.
The regulator, Ofgem, has the authority to prevent such overcharging under the terms of the Transmission Constraint Licence Condition (TCLC) and we raised this matter directly with Ofgem in October 2023 and again in May 2024 but have received no substantive reply.
Table 1 shows the wind farms which are or have been unsubsidised while taking constraint payments. Included are Moray East and Hornsea 1 & 2 offshore wind farms which deferred implementing their Contracts for Difference subsidy, in the case of Moray East by two and a half years. The total payments to this category of wind farm exceed £340 million, which we consider to be vastly in excess of what could be argued was justifiable.
Our conclusion has received further support in recent weeks from the fact that the bid price for reducing output for some of these wind farms has fallen sharply.
It is not apparent whether this fall in prices is because of a belated intervention from Ofgem or whether the wind farms themselves have at last recognised that the Transmission Constraint Licence Condition precludes profiting from grid constraints.
Table 1: List of ‘unsubsidised’ wind farms taking constraint payments
| Windfarms | GWh constrained | GBP (million) | Average Accepted Bid Price | Latest Bid Price | Date First Constraint Payment | Date Latest Constraint |
| Hornsea 1* | 44.2 | £3.1 | £70 | £93 | 10/02/2020 | 10/02/2020* |
| Beinn an Tuirc 3 | 159.7 | £3.1 | £19 | £5 | 24/05/2021 | 05/02/2025 |
| Crossdykes | 109.7 | £5.1 | £47 | £31 | 29/07/2021 | 05/02/2025 |
| Gordonbush Extension | 257.8 | £3.8 | £15 | £4 | 11/09/2021 | 12/02/2025 |
| Moray East** | 2,014.6 | £136.8 | £68 | £79 | 21/09/2021 | 29/02/2024** |
| Aikengall IIA | 244.0 | £13.9 | £57 | £68 | 24/12/2021 | 03/02/2025 |
| Douglas West | 62.7 | £3.6 | £57 | £30 | 05/02/2022 | 05/02/2025 |
| Glen Kyllachy | 110.2 | £8.7 | £79 | £85 | 28/02/2022 | 04/02/2025 |
| Windy Rig | 74.5 | £5.3 | £72 | £29 | 28/02/2022 | 07/02/2025 |
| Halsary | 153.4 | £4.3 | £28 | £10 | 02/03/2022 | 12/02/2025 |
| Twentyshilling | 48.8 | £3.5 | £72 | £29 | 18/09/2022 | 07/02/2025 |
| Kennoxhead | 112.8 | £3.1 | £28 | £31 | 05/10/2022 | 05/02/2025 |
| Blary Hill | 33.5 | £2.4 | £71 | £73 | 06/10/2022 | 04/02/2025 |
| Sandy Knowe | 93.0 | £7.0 | £75 | £55 | 12/03/2023 | 02/02/2025 |
| Dalquhandy | 23.0 | £1.8 | £78 | £70 | 11/04/2023 | 04/02/2025 |
| Creag Riabhach | 122.2 | £9.4 | £77 | £90 | 20/05/2023 | 25/01/2025 |
| Seagreen | 4,513.9 | £104.2 | £23 | £0 | 28/06/2023 | 12/02/2025 |
| Hornsea 2 - Phase 2*** | 63.8 | £4.1 | £64 | £46 | 02/07/2023 | 02/07/2023*** |
| Greengairs East | 45.8 | £2.9 | £63 | £70 | 02/09/2023 | 04/02/2025 |
| Cumberhead | 47.5 | £1.6 | £33 | £23 | 01/11/2023 | 05/02/2025 |
| Kype Muir Extension | 18.3 | £0.5 | £28 | £39 | 02/05/2024 | 05/02/2025 |
| Viking | 564.5 | £9.8 | £17 | £4 | 02/08/2024 | 12/02/2025 |
| Broken Cross | 13.4 | £0.1 | £10 | £11 | 15/11/2024 | 04/02/2025 |
| Moray West | 45.7 | £1.9 | £41 | £44 | 20/12/2024 | 04/02/2025 |
| Neart Na Gaiothe | 12.6 | £0.2 | £16 | £30 | 12/01/2025 | 05/02/2025 |
| South Kyle | 7.3 | £0.2 | £24 | £25 | 16/01/2025 | 07/02/2025 |
| TOTAL | £340.2 |
Three wind farms in the above table received constraint payments prior to taking up their CfD, thus, during a period when they were effectively unsubsidised. These wind farms were:
* Hornsea 1 took up the CfD March 2020 – thus latest bid price in the table is for the accepted bid price on 10 Feb 2020, the date of the last constraint payment under the unsubsidised regime
**Moray East took up its CfD on March 2024 and the latest bid price in the table is for the acce accepted bid price on 29 Feb 2024, the date of the last constraint payment under the unsubsidised regime
*** Hornsea 2 took up the CfD March 2024 – thus latest bid price in the table is for the accepted bid price on 2 July 2023, the date of the last constraint payment under the unsubsidised regime
Figure 1 shows the bid prices asked by the generators over time for the three most constrained wind farms listed in Table 1. The figure shows that Moray East was asking for prices in excess of £60 per MWh for most of the time that it was unsubsidised. The price sought by Seagreen, however, has plunged from £20-£30 per MWh to a current price of £0.19 per MWh. Similarly, Viking wind farm on Shetland, which only started generating in August 2024, has dropped its price from around £30 per MWh to £3.88 per MWh.
Figure 1: Change over time of the average daily bid price set by Moray East and Seagreen offshore wind farms and Viking wind farm for reduction of output per MWh
It seems reasonable to assume that these lower prices are representative of the real cost of reducing output and suggests that the prices asked over the last 5 years have been excessive. If this is correct, Ofgem’s failure to intervene is surely negligent.
To put this in concrete terms: taking 19p per MWh as a reasonable price, it would appear that the consumer was overcharged by approximately £338 million. If that is so, there is a strong case for Ofgem fining these windfarms for breaches of the TCLC and returning the funds to the consumer.