UK Wind Farm Constraint Payments

Constraint payments for UK windfarms occasionally hit the headlines. At times when there is more wind electricity being generated than the UK grid can handle, wind producers are paid to disconnect from the grid. Renewables enthusiasts will argue this is a small price to pay for Green Electricity while sceptics are riled by the £53 million pounds paid to wealthy landowners in 2014 for not producing electricity.

This is a short post based on the excellent database maintained by the Renewable Energy Foundation (REF). REF also provides this guide to constraint payments. It strives to bring transparency to an opaque system of pricing and subsidy. From what I can gather, when a conventional generator disconnects it has to pay to do so but when a wind generator disconnects, it gets paid for doing so.

Figure 1 Annual constraint payments jumped in 2013. This is largely down to growth in wind capacity and grid bottlenecks. Of course one way to solve this waste of money is to throw more money at the problem. Costly grid expansion should see constraint payments fall in the years ahead.

Figure 2 In five years, cumulative constraint payments have grown to £154 million.

Figure 3 The amount of wind electricity constrained has grown more rapidly than the cost since the cost of constraint has fallen from £218 / MWh in 2011 to £74 / MWh in 2015. In 2014, 659 GWh of wind electricity was wasted. Enough to power 155,000 homes for a year, to use the metric preferred by the renewables industry. And we had to pay for that waste.

The size of the constraint payments need to be viewed in the context of the size of the UK electricity market. I’ve not found that easy to establish, but my best guess is of the order £2.5 billion (EBIT – earnings before interest and tax) per annum. Constraint payments of the order £50 million are 2% of earnings and a drop in the ocean of turnover. This is no doubt how the generators and regulator view the situation. The other side of the coin is to ask what society could have had for the £154 million paid out so far to generators for doing nothing?

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12 Responses to UK Wind Farm Constraint Payments

  1. PhilH says:

    My estimate of the UK electricity finances in 2014 to view it context:

    Total supply was v roughly 300,000 GWh, at a wholesale price of v roughly £50/MWh = £15,000M

    Total losses in transmission & distribution (7%) were 20,000 GWh, at £50/MWh = £1,000M

    Constrained wind generation was 659 GWh, at £82/MWh = £54M

    At Left Foot Forward’s look at pay and bonuses at the Big Six ( it’s reported that in recent years, at one of them the chairman earned £10M/yr, at another bosses shared out £7M/yr in bonuses alone, at another two bosses earned £2M/yr each, one of them having built up a pension pot of £9M, at another 5 bosses’ aggregate earnings were £15M/yr, at another the CEO’s total package was £3.5M/yr.

    New parlour game: if you were the UK gov’t minister in charge of reducing electricity bills for heard-working families, which waste of money would you tackle first?

  2. markus says:

    What is the total amount of income of these wind farms ?

    What percentage of their income comes from constraint payment ?

    Are the constraint payments taken in account in the electricity price from wind ?

  3. Elvis says:

    Constraint payments to non-wind sources seem to be quite large too. See here for example where wind constraints in 2013 were £7m and total constraint paymentss £170m. The total cost of balancing the network was £803m.

    Also note that although REF says generators *pay* to be constrained off, they seem actually to be re-paying part of what they have been paid under contract to provide electricity. That is how I interpret this from your REF link:

    Generators may be asked to reduce generation, even if they are contracted in to the market, because there is an error in the demand forecast, and less electricity is required than was expected. In such cases, a conventional generator will actually pay to reduce its output, because it is saving fuel. The generator’s financial position is protected because it retains that part of its price over and above the fuel cost. In other words when it is contracted into the market and is for some reason then compelled by National Grid to stop generating it does not lose income.

    And the amount they bid to be taken offline is never going to be more than it costs them, most likely less, so they probably profit from the fuel not used. So in a sense they are being paid (and have been paid for a long time – constraint payments and balancing are not something that came with wind) for “not producing electricity” as well.

  4. jacobress says:

    The difference is that conventional producers are being paid constraint payments only after having been contracted to supply power to the grid.
    Wind is ALWAYS contracted, by law – there is a legal mandate to buy wind power whenever, and at whatever quantity, it is produced.
    Some of the constrained payments paid to conventional producers are probably CAUSED by wind supply. You have to add that to the constraints paid TO wind.

    • Roberto says:


      • Stuart Young says:

        There is no such edict for NG’s acceptance of renewable energy. I checked this some time ago with John Constable. NG only accepts wind or other renewables over conventional generation because it is cheaper to constrain off conventional generation because of ROCS etc in the price of renewables. NG has to balance its books as well as the grid so renewables “take precedence” simply to balance NG’s budget and the rest of the country pays. NG constrains off the cheapest source of generation (to NG) available at the time and only constrains off wind etc when it has exhausted all other cheaper (to NG) options. The difference between constraining off conventional generation and constraining off wind is that conventional is constrained off for balancing purposes, albeit at times caused by unwanted wind, but wind is constrained off last because of the cost and is constrained off because NG has run out of cheaper options and wind is threatening grid stability. Constraint payments to wind are effectively an emergency response to potential instability caused by wind in the first place.
        I believe that the cost of constraining off conventional generation simply to allow increasing wind output onto the grid must be a very significant sum indeed by now and rapidly rising, and that is becoming a bigger scandal than constraining off wind, but I dont know where to find this information.

  5. Sarah_Z says:

    While the location of some types of generation, particularly renewables may mean they are more likely to be constrained there isn’t a separate rule for any particular type of generation that offers a different regime of constraint payments. The mechanism for payment where there are transmission constraint payments has been in place ever since privatisaton, the concept of generation constraint having been there long before that.

    It may be useful to read this article by National Grid’s Head of Network Strategy to understand on what basis constraint payments are made and why this approach has been taken.

  6. jacobress says:

    ” there isn’t a separate rule for any particular type of generation”
    Except the “MUST BUY” rule for wind.

  7. jacobress says:

    In the National Grid piece, linked above, it says:
    “The UK has also committed to reach a target of generating 15% of all energy from renewable sources by 2020.”
    Well, this explains the whole thing.
    No need to waste 1000 words to try to claim that: “we adopted the same approach for wind farms as we cannot discriminate between generators.” This rings untrue.

  8. Nial says:

    AIUI Convention power stations also receive ‘constraint’ payments to switch ON, where with wind constraints are always to switch OFF.

  9. BillB says:

    I am not sure how far it is true that, “Costly grid expansion should see constraint payments fall in the years ahead”.

    National Grid normally justify curtailing wind output by saying that there is too much intermittent load on the system, thereby endangering system stability.

    Even if grid capacity is increased, I suspect that this will remain a problem.

    It is exacerbated by the inaccuracy of wind forecasting. even short-term forecasting is occasionally out by very large pervcentages, as we see on the Balancing Mechanism website records.

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