Compensation payouts to wind farms soar, telegraph can reveal

British householders were forced to foot a £173 million bill to compensate wind farms ordered to reduce the power they provided the country during the last financial year, The Telegraph can reveal.

As part of a National Grid system of so-called “constraint payments”, electricity generators receive generous compensation payouts when told to cut output as the network tries to balance the UK’s power supply.

While this is often done to ensure electricity supply meets demands, it can also happen when wind farms are being battered by high winds and consequently create too much energy.

The Telegraph revealed yesterday that the offshore Hornsea Wind Farm was given £100,000 to reduce power it supplied in the days immediately after it was linked - along with a gas fired power station - to a once-in-a-decade power outage. Details of exactly why it received these payments have not been revealed, but National Grid and Orsted - the plant’s owner - insisted it was not linked to the earlier blackout.

National Grid, a FTSE 100 company, insists these “constraint payments” keep consumers’ bills down, in part because they do not have to buy more infrastructure to store or transport any excess power.

The compensation cost, much of which is clawed back from domestic energy companies, is then invariably passed down to consumer and business bills.

Energy experts predict these payouts to renewable energy generators could soar “exponentially” as the country relies increasingly on wind power plants.

Ben Guest, a specialist in renewable energy companies and markets at asset management firm Gresham House, said compensation could even rise to £1 billion a year - nearly six times last year’s payout - in the foreseeable future.

“The amount of power delivered by renewables in the coming years is going to result in far larger amounts of over-supply than you see today,” he said.

It is anticipated that power generated by renewable energy could increase by up to 50 per cent over the next five to ten years as more wind farms are established, many set up to take advantage of generous government subsidies.

The stark warning came after it emerged the Hornsea plant in the North Sea suffered a “technical fault” and Little Barford gas fired station in Bedfordshire was struck by lightning last Friday contributing to the worst blackout in a decade.

National Grid yesterday handed Ofgem, the energy regulator, and ministers its initial findings into what caused that 5 per cent drop in power supply triggering a devastating power outage for more than one million homes and businesses, as well as disabling huge swathes of the rail and Tube networks, and leaving a hospital and airport without power. The report has not been made public.

According to National Grid’s own statistics, compensation payments to wind farms peaked in September, October and March of the last financial year, when monthly payments hovered around £30 million a month, way more than the average monthly £10 million.

Explaining why these payments can soar, Tom Edwards, of energy consultant Cornwall Insight, said: “The issue is with the network, and in particular getting the electricity from where is generated to where it is needed.

“National Grid has plans to improve the network between Scotland and England but it will cost a lot of money and take time to build those links.”

A National Grid ESO spokesman said: “It’s our aim to keep costs as low as possible and therefore keep consumers energy bills down too. Constraint payments are complex but are the cheapest way of managing the GB electricity system.

“The alternative is building more infrastructure at a significant cost, meaning higher bills for consumers. We continuously weigh up the costs of constraint payments versus building more infrastructure, and to date, it has always been cheaper to use constraint payments within the existing balance of costs and resilience in the current UK regulatory framework”