Energy minister Michael Fallon orders wind farms to cut compensation
charges as figures show they are paid millions for turbines to stand still
in stormy weather
By Tim Ross, Political Correspondent
Onshore wind farms are being paid £30 million a year to sit idle during the
windiest weather.
The payments are made because the cables which transmit power from the
turbines to the National Grid cannot cope with the amount of electricity
they produce during stormy conditions.
Ministers are launching a fresh crackdown on the compensation charges –
which ultimately end up on customers’ bills – and are threatening to force
power companies to reduce the cost of the payments.
Michael Fallon, the Energy Minister, has written to renewable power
companies warning that he is ready to change the law to force wind farms to
lower their prices if they fail to cut the costs voluntarily.
The scale of the compensation payments, which can be disclosed for the
first time, will fuel opposition to wind generators from campaigners who
argue that they are inefficient and blight the landscape.
The payments are made to wind farm owners on top of “green subsidies” that
they already receive to encourage renewable power plants to be built.
These subsidies are set by the government but paid ultimately from
customers’ household bills.
On a daily basis, the National Grid forecasts what the likely demand for
electricity will be and assesses it against the generating capacity of wind
farms, as well as coal, gas and nuclear power stations.
When there is expected to be too much electricity generated by power plants
for the network of transmission cables to handle, the National Grid invites
companies to bid for compensation to shut down some or all of their equipment.
Wind farms are often thought to be among the first generators chosen to be
switched off because they are relatively easy to stop, by applying brakes
to the turbines to halt their movement.
Individual wind farms companies set the levels of their compensation
demands and the National Grid then chooses which bids offer the best value.
The total amount paid out through these compensation arrangements – known
as “constraint payments” – has risen dramatically in the last four years as
the number of onshore wind turbines has grown. Between 2010 and October
2012, £17.8 million was paid in total.
But new figures based on Ofgem data disclose that these payments are
expected to cost consumers £30 million this year.
On one day in August last year, 27 wind farms across the country had to
shut down some or all of their turbines, costing more than £2 million in
constraint payments, according to figures from the Renewable Energy
Foundation.
In the first six weeks of 2014 alone, more than £4.2 million has been paid
to wind farms to switch off their equipment, the Foundation said.
However, under pressure from the government, the average compensation
payment has fallen significantly, even though the total has risen.
A new licence rule which applies to larger wind farms bans them from
charging high prices, at the expense of consumers, when they are asked to
switch off their turbines.
But smaller wind farms are exempt from the licence requirement and Mr
Fallon is concerned that some are now charging the National Grid unduly
high prices to shut down.
Smaller wind generators are charging the Grid 30 per cent more on average
to switch off turbines than larger power plants, the figures showed.
In a letter to Renewable UK, the trade body for wind power, Mr Fallon said
this practice must end.
Mr Fallon urged wind power companies to show “restraint” in the prices they
charge for compensation.
“Bids being accepted by National Grid to reduce generation from a few
licence exempt wind farms are substantially higher than those relating to
licensed wind farms,” Mr Fallon said.
The energy regulator, Ofgem, has contacted some of the offending wind farm
owners and these companies should “cooperate”, explain why their charges
are so high, and, “where appropriate”, reduce their bills, he said.
Mr Fallon said “the government stands ready, if necessary”, to force
individual wind farms to comply with tougher rules if they fail to cut
their charges.
Ministers are also prepared to “extend the discipline” of the licence
rules, which prevent larger wind farms exploiting the compensation scheme,
to all onshore wind farms regardless of their size, he said. This will be
done “through changes to legislation, should that prove necessary”, Mr
Fallon warned.
The estimates seen by the Telegraph suggest that on average, wind farms
that are exempt from the licence rules were paid £104 per megawatt hour to
turn off their turbines last year, compared with £80 per megawatt hour for
larger licensed generators.
It is understood that eight wind farms in particular have been charging
excessive rates in exchange for shutting down turbines during windy
weather, although they have not been publicly named.
Mr Fallon has also written to Energy UK, representing the major power
companies, Scottish Renewables and the Renewable Energy Association.
Maria McCaffery, Renewable UK’s chief executive, said the wind farm
industry had already taken steps to bring down costs of compensation and
would continue work to “provide the best value for money for consumers”,
she said.
“As the cost of using fossil fuels is so high – and importing gas is
particularly expensive – we need to lessen our dependence on them by
harnessing our own abundant, clean and totally sustainable resources,” she
said.
“Wind is playing an increasingly vital role in our electricity mix as a
flexible energy source that can be managed to fit our electricity demands
by shutting down and powering up more easily and more quickly than other
forms of energy.”
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