Householders are forking out an estimated £150 extra a year on their energy bills to switch off or on generators, including Scots wind farm turbines, it can be revealed.

Households who have seen a doubling of bills over the last three years are facing further pain over the cost of balancing the grid, to ensure there is enough energy to go around and also to curtail generation when there is too much.

It has emerged the 'grid balancing' has cost consumers over £17bn over 12 years.

The energy regulator Ofgem has launched a crackdown on energy firms 'profiteering' saying some generators had been attempting to gain excessive financial benefit at a cost to consumers.

The amounts paid to energy firms through what is called the 'balancing mechanism' has soared by over 350% from just £886m in 2011/22 to £4.149bn in 2022/23.

The costs for 2022/23 are equivalent to every household in Britain paying an extra £147.

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Energy Action Scotland said that there should be a major shake-up over how the country pays for the charges so that it does not fall on billpayers.

The Herald:

Ofgem has launched a formal statutory consultation on plans to introduce a new licence condition to prevent electricity generators from making excessive profits through the balancing mechanism.

The mechanism is the name of the trading system which is operated by National Grid and used to match electricity demand to electricity supply.

This is necessary because electricity cannot be stored in any significant volume.

Consequently, as demand for electricity goes up and down during the day, electricity supply must also be increased and decreased to match on a second by second basis.

It allows the National Grid to accept bids and offers from participating electricity generators to decrease or increase electricity generation. These trades take place in a succession of trading periods which comprise each half hour of the day.

Most of the participating electricity generators are nuclear, gas, and coal fired power stations, but the number of wind farms joining has been rising.

Payments are also made to switch off Scottish wind farm turbines because they produced too much power.

Because electricity generally needs to be generated at the time of demand, compensation - known as constraint payments - is given to energy firms when they have to reduce their output. With wind farms it involves turning off turbines when the network is unable to cope with the power they produce.

The payments are made by the National Grid ESO but charged to consumers and added to energy bills.

The payments over wind power in Scotland which kicked in in 2010, come when what it generates cannot be exported to England due to insufficient grid infrastructure or because there isn't the demand.

Official National Grid data examined by the Herald shows that as of last year, the compensation payments for wind alone had risen to £395m in the previous two years - £126m more that in the two year period from 2017. In 2012 and 2013, it is estimated constraint costs were at just £19m.

Frazer Scott, chief executive of Energy Action Scotland said: "It has been clear that this market is rigged in favour of the profits of companies rather than protections for consumer and we have been overpaying.

The Herald:

"Our energy bills should be fundamentally restructured to have affordability in the heart of the system so that people are put first rather than profit.

"With the balancing mechanisms and how debt is repaid, all of these things work against the consumer and many of these things should have been dealt with by general taxation and other fiscal mechanisms, not energy bills.

"Pushing things into energy bills is a regressive form of tax that clearly penalises those who can least afford it."

Fair energy prices campaigner Kenny MacAskill, MP for East Lothian and Alba Party deputy leader who has conducted his own analysis of constraint payments added: "The absurdity of paying to have turbines switched off [and on] shows the dysfunctionality of the system.

"Privatisation of the grid has seen a lack of capacity and insult added to injury with costs being highest when the need for power is greatest."

Ofgem said it was taking action over concerns that some power generators were holding back supplies so that they can fetch higher prices.

Earlier this month Scots energy giant SSE received a £9.8m penalty for claiming too much money by way of compensation for switching off generators.

A detailed investigation from Ofgem found that the Perth-based firm received "excessive payments" from the National Grid Electricity System Operator (NGESO) during periods of so-called transmission constraint.

Ofgem has said that when managing a 'transmission constraint' it only has limited alternatives available to it and there are risks that generators can exploit their position by increasing prices to reduce output and the regulator puts rules in place to prevent this.

The Herald:

Ofgem’s SSE probe, which was launched in October 2021, found that the energy firm made the bid prices it charged the electricity system operator to lower output from the Foyers pumped storage power station at Loch Ness “significantly more expensive”, including in periods of transmission constraint.

Ofgem said that, while there was no evidence to suggest the actions were deliberate, it found that SSE breached the rules in place.

SSE’s fine was reduced from £11.58 million as the company settled the investigation early.

SSE had since said it would put in place a new pricing system designed to properly reflect the costs and benefits of reducing its generation at Foyers.