Multi-million pound payments to wind farm operators not to generate electricity understandably anger consumers who see their fuel bills rising.
The fact that some operators can name their own compensation payments, as The Herald reports today, is a bizarre situation that will raise hackles about subsidies for renewable energy and the proliferation of turbines in sensitive areas.
Constraint payments are given to wind farm companies to compensate them for not producing power during periods of high generation and low demand. This can be to avoid overloading the National Grid during windy weather or to allow maintenance work to be carried out on sections of the grid.
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The amount paid out is rising rapidly as more wind farms begin generating. The scale and speed of wind farm development, notably in Scotland and especially in the Highlands, has surprised many people as has the level of compensation payments. Officials at the Department of Energy and Climate Change (DECC) should not be among them, since the Renewables Obligation (RO) subsidy has now been in operation for more than a decade with the express purpose of increasing the amount of electricity generated from renewable sources.
It is now evident there has been a failure to prepare for this additional supply from new areas by providing extra capacity on the grid. The constraint periods are becoming longer and the payments larger, undermining the progress from fossil fuels towards green energy. Wind farm operators in Scotland have received almost £6 million in payments to stop producing electricity over 33 days between mid-April and mid-May. This period of constraint, which lasted a further two days, is the longest yet but it seems certain that record will be overtaken, if only because the work required on the grid will necessitate further constraint.
Companies that develop wind farms are due compensation if they are prevented from carrying out their business but there is no logical basis for operators to profit from not generating electricity. This is recognised by the DECC which grants electricity generation licences. The conditions for these state that excessive benefit should not be obtained in relation to transmission constraint. Yet all generators of 50MW or below are automatically exempt and the DECC is continuing to give individual exemptions to generators of between 50 and 100MW, effectively enabling them to name their price.
This is a nonsensical situation, particularly as the cost is ultimately met by the consumer. The loss incurred per megawatt hour should be calculated according to the RO subsidy payable and a fair formula applied to all providers.
This loophole appears to be the result of an oversight on the part of the DECC. It should have been spotted long ago but, now that it has been revealed, it must be closed without delay.