• Wind farm operators are ‘gaming’ the system to receive higher payments.
• Companies are exaggerating claims of energy production.
• Payments are added to consumer bills.
New research has revealed that wind farm operators are manipulating the system to gain higher payments when they are asked to produce less electricity. According to the International Journal of Industrial Organisation, companies are exaggerating the amount of energy they expect to produce in order to receive higher payments. This behaviour has raised concerns about the government’s decision to relax a ban on onshore turbines, and subsequent consumer subsidies paid to energy firms operating wind farms.
According to the Renewable Energy Foundation, companies were paid £227 million last year not to produce electricity. This is due to the high concentration of onshore windfarms in Scotland which often leaves the electricity grid unable to cope on windy days. This has led to a system of ‘constraint payments’, where wind farms are paid not to generate energy to avoid overloading the network.
The latest study, by Prof. Michael Waterson and Mr. Mario Intini, suggests that Scottish wind farms are taking advantage of the infrastructure constraints and rules in their operations to secure favourable deals. The Western Link, a 530-mile cable running from Scotland to Wales, was built to provide more capacity to transport energy, but this has not stopped wind farms from gaming the system.
The study found that the total energy forecast declared by Scottish wind farms is 2.5 times higher when the network is constrained, exacerbating the strong wind forecasts. National Grid chooses whether to accept their bids.
Overall, the research suggests that wind farm operators are exploiting the system to gain higher payments than what otherwise would have been given.
New research has revealed that wind farm operators are essentially ‘playing the system’ to collect heftier sums by not generating electricity during times when the transmission network is at risk of being overloaded. The Telegraph has the story.
A paper published in the International Journal of Industrial Organisation concluded that companies were “exaggerating” claims about the amount of energy they expected to produce at times when the transmission network risked being overloaded.
The behaviour increases the likelihood that wind farms will be paid to shut down, as well as resulting in higher payments than would otherwise have been given, to those asked to stop producing electricity, according to the economists who wrote the paper.
The findings will heighten concerns about Rishi Sunak’s decision to relax the effective ban on onshore turbines introduced by David Cameron in 2015.
The ban was partly introduced in response to concerns among Tory MPs about the level of consumer subsidies paid to energy firms operating wind farms.
Shortly before Mr. Cameron’s ban, this newspaper revealed that £11.1 million had been paid to a single wind farm to shut down over a three year period.
Last year, companies were paid £227 million not to produce electricity, according to the Renewable Energy Foundation, which compiles energy data. …
The “constraint payments”, which are ultimately added to consumer bills, are being fuelled by a high concentration of onshore windfarms in Scotland often leaving the electricity grid unable to cope on windy days.
As a result, wind farms are paid not to produce energy in order to avoid overloading the network.
The latest study – by Michael Waterson, a Professor of Economics at the University of Warwick, and Mario Intini, Assistant Professor in Applied Economics at the University of Bari Aldo Moro – said: “Scotland presents a prime example where generating firms have secured favourable deals but appear to have taken strategic advantage of infrastructure constraints and rules in their operations.”
The paper added that “the concentration of British wind generation in Scotland provides clear constraints on the grid and in all likelihood places particular wind farms at an advantageous position in exploiting these constraints”.
The Western Link, a 530-mile high-voltage cable running from the west coast of Scotland to the north coast of Wales, was built to help overcome the problem by providing more capacity to transport green energy from onshore wind farms in Scotland, to England and Wales. …
Under the system of constraint payments, each wind farm owner asks for a particular sum per megawatt hour of energy its turbines would have produced had they been switched on. They also provide final physical notifications (FPNs) of how much energy they expect to produce.
National Grid chooses whether to accept their bids.
Prof. Waterson and Mr. Intini studied a sample of 509 days between 2018 and 2019, examining the bids made by wind farm owners, including specifically during periods when it seemed like they would be asked to shut down – such as when the Western Link was not working.
They wrote that their findings were “consistent with Scottish wind farms gaming the system”.
The paper states: “The overall wind generation forecast when constraints are imposed is around twice what it is when they are not. However, the total FPN declared by Scottish wind farms is 2.50 times as much in constrained periods, in other words exacerbating the strong wind forecasts.”