Balancing mechanism and connect and manage constraint payments to windfarms

This paper provides a useful explanation of how wind farms in the U.K. are compensated for not operating. Wind projects operating in areas of limited transmission capacity are straining the system and require that they be turned off during periods of low demand but high wind output. £981 was the highest payment for £50 worth of loss. Last fall (2013) the rules were changed to supposedly prevent “excess profit” being made, but even then the average payment for one day was £84/MWh, with the highest being £149/MWh.

National Grid (NG) balances supply and demand for electrical power through the Balancing Mechanism (BM). The daytime/night-time, weekday/weekend, summer/winter etc fluctuations are largely self-regulated, which means that if there is to be no demand then the electricity is not generated. NG does the fine tuning second by second by asking for more or less generation and paying for it, or compensating for the generator’s losses when it has to shut down.

The compensation is best explained by the Renewable Energy Foundation (REF) here:

In summary, all “constrained off” generators are paid for the electricity they have been prevented from selling. In the case of oil, coal or gas, the generators give NG a rebate for the saving on fuel. In the case of wind, the generators lose their Renewable Obligation Certificate (ROC) and Climate Change Levy Exemption (CCLE) and need to be compensated for that loss. That is only fair and reasonable.

In practice, because wind energy is the most expensive to constrain off, NG never chooses voluntarily to constrain off wind energy for routine balancing of the grid. In practice, it is only constrained off if NG has no other option.

Sv Briefing Constraint Payments

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JAN 3 2014
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