Balancing Act, or Clowns. Is this a Circus?

Sometime toward the end of last year, the following headline on the Telegraph website caught my eye:-

“Wind farm paid £1.2 million to produce no electricity”

Two further titles on the same website are relevant to this matter:-
“£10m cost of turning off wind farms”, and “Wind farms earn £1m to shut down over Christmas and New Year gales”.

At first, it didn’t seem to be a rational statement at all – why pay any money, if you are not buying anything? However, on reading further, it does seem to be a little complicated.

It appears that the National Grid is not exactly “man enough for the job” under peak conditions, and incoming power has to be reduced to prevent an overload. To reduce incoming power, suppliers are requested to switch off their feed. This will naturally result in a loss of income, and of subsidy, so the suppliers would naturally prefer to keep the supply flowing.

For wind farms, one might think that paying the normal rate plus the subsidy for the period of disconnection would be sufficient. The farms would then be certain of their income, and could plan accordingly. But no:-

“Crystal Rig received by far the largest single payment because the National Grid runs an auction, inviting energy companies to say how much they want in compensation for switching off. Crystal Rig’s owners asked for £999 per megawatt hour of energy they would have produced had they been switched on. Incredibly, the figure Crystal Rig had bid was accepted by the National Grid.

So, at this level of payment, Fred Olsen Renewables (the owners of Crystal Rig), will receive 10 times as much money for not supplying electricity, as they do for supplying it!

This system of compensation is known as “Constraint Payment”, and it does not only apply to wind power:-

” Robert Norris, from RenewableUK, the trade association representing the wind energy industry, said: “All power generators – including coal, gas and nuclear – receive these constraint payments when they’re told to shut down, to stop the grid being flooded with too much power.

“The fixed rate for nuclear power is £10,000 for every megawatt hour they’re not generating – far higher than the rates for wind. The Department of Energy and Climate Change says the majority of these payments go to coal-fired power stations and gas-fired power stations – only a tiny fraction goes to wind in comparison.

Sometimes the consumers are in luck; wind speeds are so high that the turbines have to be shut down for safety reasons. In this case, the companies are paid nothing at all. More often than not, however, the consumers foot the bill for both constraint payments, and subsidy.

On the Google entry for the National Grid, I found the following text:-

“At National Grid we are committed to serving our customers by delivering energy safely and reliably while working to keep costs low”.

It seems that they have clowns working in their financial department, and on their website!