Bishop Hill Constraint payments
Sep 2, 2014 Energy: wind There has been an interesting exchange of views about windfarm constrain payments in recent days. Last week, the Telegraph reported that three windfarms had been received £11 million to switch off, prompting a mealy-mouthed response from DECC.
Constraint payments are nothing new. National Grid has been paying coal and gas generators - and others - to change their planned output well before wind farms joined the mix.
These payments are made when power cannot be transmitted to where it is needed, usually due to congestion at a certain point on the network. When this happens, National Grid needs to take action to ‘balance’ energy supply and demand, and ensure the lights stay on.
The payments are made on a competitive bid basis to ensure that these costs are as low as possible. But when constraint costs would be higher than the cost of building new network capacity, those network reinforcements are being made instead.
We tightened the rules in 2012 so generators cannot profit unfairly during constraint periods. Since then, prices paid to generators to curtail wind have more than halved.
The suggestion that constraint payments are not new is true. I think it's also true to say that it's also cynically misleading. As I understand it, in a traditional windfarm-free grid, you sometimes can't get the power from plant A to where it is needed and so you have to get plant B to generate instead. You give plant B a payment ("constraining on") in compensation and plant A doesn't operate.
In a wind-farm corrupted grid, the situation is different. Say that plant A is a windfarm and plant B is a conventional gas-fired station. Although plant B still gets a payment to constrain on, when the decision is take to have plant A switch off, the operators have lost all their subsidy payments as well as their income from electricity sales. The grid therefore offers compensation payments ("constraining off") to the operator for this. Indeed, as the Renewable Energy Foundation point out, constraint payments are often worth more to windfarm operators than the whole irritating business of actually generating power. The effect is that the consumer ends up paying twice: once to have a conventional generator actually make electricity and once to have the windfarm not make it.
It's worth remembering this next time someone tells you the energy companies are ripping you off. They may well be. But they are doing so with the full connivance of the political classes.
Reader Comments (12)
Is it not also the case that constraint payments have been made to conventional producers, but premised on the fact that they can (usually) provide electricity when it is needed.
By comparison, windfarm get to produce electricity whenever they feel like it, with the added bonus of getting a constraint payment when they do feel like producing it but it isn't needed.
Like good little Socialist central planners, they are trying to turn natural economic on its head, by making society live under the constraint of when supply and specific types of supply, can be provided, rather than allowing the market to try and provide power when it is required or desired.
It is enraging.
It has taken you a long time to suss out this scam Bish. I realised what was to occur when the man who closed down my company in 2001, one of the Mafiosi who paid for Brown and Balls to get into power, told me how rich he was going to get from the subsidies, along with the PFI scam.
This Mafia grabbed capital from W. Midlands' businesses like Transtec and Rover, to invest in country estates and renewables, the largest such UK corporation. We now have to pay the bill for our first Mafia-controlled government.
As the contribution of intermittent power generation increases, the grid reaches a point where all generation becomes intermittent, with concomitant decrease in efficiency and increase in overall cost, an ever growing percentage of which will be constraint payments.
And in the meantime as I write, wind is producing a truly massive 0.45GW (which is rather less than one-fourteenth of instlled capacity) - or 1.2% of (very low, summer, mid-day) demand.
But - hey - Mr Potato Ed has sanctioned loads more offshore wind farms, so we'll be alright..... won't we..?
(This winter, I promise you, is going to be like that well-known Chinese curse: 'May you live in interesting times...')
The Guardian in support of the green NGO's says a much larger sum is paid to constrain off fossil fuel generators. What they fail to make clear are the contractual arrangements the Grid has with the generators. The bone of contention is the higher rates per MWh paid to constrain off wind.
Much of the time when the Grid connects windfarms they have to constrain off coal and gas. NG explain this is a condition of our Transmission Licence given to us by the Government. In effect the renewables are connected at a higher price than the constrained off generators. The customer is paying more and twice over for the same unit of electricity.
The National Grid do explain this in their articles - 'Connecting'.
"So why do we need to restrict generation and make constraint payments? To meet our future energy needs, the UK must connect new sources of generation and, at the same time, reinforce the network so that it can accommodate this extra capacity. The UK has also committed to reach a target of generating 15% of all energy from renewable sources by 2020.
We have two options. The first is to hold off on connecting any new generating capacity until the extensive programme of network reinforcement has been completed. This would mean delaying connections by several years.
The second option is to bring on stream these new connections – a large proportion of which are from renewable sources – well ahead of time, but at the expense of some constraints on the transmission system.
Following consultation, the UK Government has decided to adopt the second approach and accelerate the process of new connections".
Connecting the north of Scotland windfarms to the Grid when the necessary cabling did not exist was not a business decision but a Government one. The DECC wanted to show the CCC they were meeting the CO² targets.
The £1.05 billion Western Link is not expected to be completed until late 2016, meaning constraint payments will continue till then. When you read the OFGEM paper there is much talk about funding arrangements, but it does not say where the money is coming from.
Before May 2015 someone has to wise the Public up to how much implementation of the Climate Change Act will cost. Ed Miliband and his fellow MP's are idiots - decarbonising by 2030 will double electricity prices. Lib/Lab/Con are all in the same boat, the DECC have plans for heating, cooking and much transport to change over to electricity. Who will break the news - no more fossil fuel?
For corroboration read HC 103-i - the Public Accounts Committee Oral evidence: Smart Meters follow-up.
Besides blowing the gaff,on the changeover to wind Stephen Lovegrove and Daron Walker reveal that Smart meters are essential to managing renewables use.
Margaret Hodge descrbed it as an awful of wishful thinking by the DECC.
The need to expand the length of interconnections from unpredictable power sources, remote from the power users, must push costs up steeply.
Has anyone yet calculated the transmission losses through this metastasizing web?
Re the DECC response. Does DECC hold a Dutch Auction that includes ALL generators? If not, why not?
Further yo my previous posting....
Wind now contributing 0.88% of demand....
DECC says the constraint payments are nothing new; the National Grid's flawed policy of paying paying coal and gas generators - and others in the past continues to this day with the inclusion of excessive constraint payments to wind farms. So now that everyone finally acknowledges the problem when is it going to be resolved?
Final comment (from me) regarding wind output...
Checked it on Gridwatch first thing this morning. 0.25GW. That is ZERO POINT THREE SIX PER CENT of installed/available capacity.
Does nobody in the DECC - least of all Ed Davey - ever look at these figures..?
Don't they even 'get it'..??
News item on BBC East this morning - fishermen are having to get compensation from the operators of the Greater Gabbard wind farm off the East coast - due to the incorrectly-buried cables snagging their nets. Cue pictures of fishermen; their boats; their nets; and ever-so-fleeting pictures of STATIONARY wind turbines....
Had to chuckle..
There is also the issue of many wind arrays being subject to 'connect and manage' agreements, especially in Scotland:
"1.1 Background to Connect & Manage (C&M) Following consultation on models for improving grid access, the Department of Energy and ClimateChange (DECC) introduced the enduring C&M regime in July 2010 with an implementation date of 11 August 2010. Under this access regime, generators are offered connection dates based on the time taken to complete a project’s ‘enabling works’, i.e. ahead of the completion of any wider transmission system reinforcements required under the security standards. Connecting generators ahead of the completion of wider works may result in additional constraints on the National Electricity TransmissionSystem. Under the C&M regime any costs arising from the management of these constraints are socialised.” (National Grid, ‘Quarterly Report on the Connect and Manage Regime, 01 July 2013 – 30 September 2013’).
"Socialised" means passed on to the consumer. I understand that some schemes may not be properly connected to the grid for years due to the backlog in work.
As I understand it, these payments do not appear in the day-to-day record of constraint payments.
"constraint costs attributable to the output of C&M units have risen from £2.4m as reported in 2011-12, to £71.8m for the full 2013-14, with the total cost attributable to C&M since the start of the regime being £79.8m". (Connect & Manage Forecast & Actuals Report July 2014).
http://www2.nationalgrid.com/UK/Services/Electricity-connections/Industry-products/connect-and-manage/.
Surely the real failing of the system is that:
1. coal generators are paid significant sums of money not to produce electricity, not because of constraints in the grid, but every single night because of the normal day/night fluctuations in demand. Currently this involves 5GW of coal generation being switched off every night and switched back on every morning; but even worse
2. when they are "switched off", their furnaces continue to burn thousands of tonnes of coal every night, generating deadly emissions of SO2, NOX, PM and CO2, despite the fact that they are contributing nothing to the grid.