Why windfarms get paid to switch off
- 04 Mar 2013, 18:00
- Mat Hope
A headline in the
Times today claims windfarms get "paid
£10,000 a day to sit idle", leading consumer group Uswitch to call
for greater transparency on so-called constraint payments for wind.
But does it really cost that much to switch turbines off, and
should we be worried about this as the UK continues to expand its
wind generation capacity? We take a look at how the payments work -
and how much they cost consumers.
Paying generators to switch off
Demand for electricity is much higher at
some times of day than others -
normally peaking between 5pm and 7pm during the week as people
travel back from work and make dinner while putting the washing on.
The rest of the time, demand is much lower.
But as electricity can't be stored in large
quantities, the National Grid has to request generators to
step up or decrease the amount of
electricity they produce to balance supply and demand. It pays
generators compensation - known as
constraint payments - when they have to
reduce their output.
To decide who gets the payments, National Grid
receives bids from generators outlining how much they want to be
paid to increase or reduce their generation. National Grid
the lowest bid to minimise the
cost - which is passed on to the consumer.
The Department of Energy and Climate Change (DECC)
says National Grid paid
£324 million in constraint payments to
generators in 2011 to 2012. This only added "
a few pence a year on a typical
electricity bill", according to National Grid.
Part of the reason constraint payments are necessary
is because of intermittent electricity sources - like
Windfarms and constraint
Between 2011 and 2012, National Grid says constraint
payments to windfarms were just over ten per cent of the total amount paid to all
generators - about £34 million.
Windfarms produce less than five per cent of our
electricity so the payments they are getting are out of proportion
to the amount of electricity they generate.
This is because the grid relies on old infrastructure
which absorbs electricity from coal and gas plants more easily than
from wind, according to renewables supplier
Good Energy. This makes it easier to
switch off the wind supply and keep the grid functioning rather
than reducing electricity supply from coal or gas.
This makes windfarms a better choice for National
Grid when choosing which power plants to turn off when there is
oversupply - and renewables trade association Renewable UK says
this means they get proportionately more constraint payments.
£10,000 to switch off windfarms
But where does the
Times's £10,000 figure come from? It
says "four wind farms in total off the south east coast received
payments amounting to £10,000" on 30 January this year - which
seems a lot.
National Grid tells us it thinks the numbers
originate from the Renewable Energy Foundation (REF), a group
which campaigns against wind power.
table shows, REF's data shows all
windfarms off the south east coast received constraint payments of
£10,627 on the 30 January.
Source: Renewable Energy
Balancing Mechanism Wind Farm Constraint Payments on 30 Jan
A large part of the reason the payout was so high
that day was because London Array negotiated a much better price to
reduce its generation than the other windfarms: £711 per megawatt
National Grid generally accepts the lowest bid. But
sometimes constraints such as power plant size and how easy it is
to get the electricity from where it's generated to where it's
needed on the grid mean it has to accept the cheapest offer that
still allows the grid to function.
We're waiting to hear back from London Array on how
it negotiated the payments.
It's worth pointing out, however, that a £711
constraint payment is considerably higher than the average
price per megawatt hour for constraint payments
since May 2010, which is £169, according to REF.
The way that constraint payments are structured means
we could end up paying more in as more windfarms are built. That
assumption is based on the idea that we continue to use electricity
in the same way, however.
There are moves afoot to make electricity use more
effective. For example, new technologies are being piloted to help
reduce constraint payments by spreading out the UK's electricity
usage so that it's not concentrated in peak periods.
One way of doing this is by installing smart meters which can turn on things like
washing machines when there is plenty of electricity available to
the grid or when demand is low - meaning windfarms don't have to be
constrained as much.
Trials are underway to see how much households can
save from doing activities like
washing when it's windy . Carbon Brief
previously calculated that using appliances when windfarms are
producing more energy could save households about £100 a year. It might also help to
reduce constraint payments, as demand would rise as the wind picks
Renewable UK says:
"The faster we change our habits, the
lower our bills will be - just by being a bit more aware of how and
when we use the electricity we're generating, to make the most of
So using electricity more smartly could be the best
way to ensure the effect of the payments on household bills is
limited as the UK builds more windfarms. That will be key to
helping the UK avoid any other £10,000 days.
Update 07/03/2013 11:30
London Array has got back to us saying it got a
higher constraint payment because the windfarm isn't fully
operational yet. It's due to be completed by spring in 2013. It
"Constraint payments reflect the
costs and impacts of being called-off. London Array is currently
undergoing commissioning of its turbines and is not yet fully
operational. During commissioning the impacts, costs and risk of
being called off is much greater than during commercial
This means it got a higher price per megawatt hour
for being called off than completed windfarms running at full
Optimistic demand control
Energy academic, Dr David Toke, has published an
interesting contribution to the debate over constraint payments. In
a detailed blog, he argues most of the coverage
is guilty of presenting an overly optimistic view of the effect
smart metering will have on demand.
This is particularly problematic because the large
fossil fuel suppliers which get a much larger portion of the
constraint payments than windfarms currently don't have any
incentive to influence demand rather than taking the payments. His
"the electricity companies are likely
to make much more money out of selling electricity generated by
their power stations (or in receiving payments for their power
plant NOT to produce energy) rather than making money out of saving
supply costs by shifting demand."
He argues for new regulation to prioritise
demand-shifting, with green NGOs better understanding the situation
and campaigning for the changes as a necessary first