Payments to wind farms to reduce output are an ongoing national scandal, with the cost to consumers now totalling well over £1 billion since the payments began in 2010.
We have repeatedly observed that the prices charged by wind farms to reduce output not only routinely exceeded the subsidy income lost when constrained but were hard to justify in any case. Grid congestion preventing dispatch is a foreseeable commercial risk and the windfarms should not be compensated at all for such an eventuality.
However, it has been accepted by government and the regulator that such compensation – for lost subsidy – should be paid.
However, in recent months Scottish wind farms that are not in receipt of income support subsidy, so called “subsidy-free”, wind farms have also been charging the electricity system operator to reduce output when generation in Scotland exceeds grid capacity and local demand.
These wind farms usually have a power purchase agreement (PPA) with commercial entities such as Tesco, who have a PPA with Halsary wind farm, and Amazon, with Beinn an Tuirc III windfarm. The commercial companies, who buy the electricity, almost certainly do so to comply with recently introduced pressure via the Streamlined Energy and Carbon Reporting framework, which is embedded in the Companies Act and thus backed by criminal sanctions, to demonstrate their commitment to carbon reduction and to renewable energy. It is the existence of this little understood legal pressure that raises questions about whether such wind farms are really “subsidy-free” but this is a separate question. The fact of the matter is that these wind farms are not in receipt of income support subsidy levied on the consumer, and they suffer no loss of subsidy when they are constrained.
Why, then, are these “subsidy free” wind farms charging for constraints, and, more pertinently still, why is the regulator, Ofgem, allowing them to burden the consumer with these charges? Read more: