Ed Miliband plots crackdown on wind farms ‘gaming’ power system

Renewables companies accused of deliberately clogging up electricity grid to earn payouts

Wind farm owners who earn huge payouts from gaming Britain’s energy system face a crackdown under new reforms proposed by power grid bosses.

The National Energy System Operator (Neso) warned on Wednesday that companies were deliberately clogging up Britain’s energy system to boost their own revenues.

This is because wind farms can be paid to switch off when the grid becomes too congested to transport their power, allowing traders to game the system.

Neso, which handles the day-to-day operations of the electricity grid, said it was concerned about the sale of power generated by Scottish wind farms to buyers in the South, even when traders know that grid congestion means the power physically cannot be delivered.

There is currently no penalty for doing this, but it means Neso must constantly intervene to balance the system.

For example, it will pay Scottish wind farms to switch off while also paying another power station in the South to generate replacement electricity.

Under the current model, the wind farm and the power station could also be owned by the same company, allowing that company to distort supply to earn payments.

Neso warned the system had created an incentive for companies “to aggravate the constraint” as this “maximises the market participant’s expected revenue”.

It now wants to force generators to sell power from individual power stations, making it more obvious when the system is being gamed.

It also wants to require generators to settle their plans further in advance to minimise last-minute changes to the system.

Balancing costs, which can easily amount to millions of pounds per day, are ultimately passed on to households through their bills.

The problem threatens to push up household bills in a blow to Ed Miliband’s promise to cut them by £300 a year.

Mr Miliband, the Energy Secretary, last year scrapped reforms that supporters said would have ended such market gaming practices following an intense lobbying campaign by wind farm owners, who argued it would torpedo investment.

The amount spent on balancing the grid hit £2.7bn last year alone and is expected to reach between £5bn and £8bn a year by 2030 without action to tackle the problem, according to Neso.

Neso warned: “The misalignment between the national wholesale price and locational balancing needs, along with the scale and predictability of congestion, presents significant risks of strategic positioning against constraints.

“This risk is more likely to arise if the network becomes more congested.”

RenewableUK, which represents wind farm owners, claimed the problem affected “all types of power generation”.

A Neso report last year said most constraint costs were focused in Scotland, where Britain’s wind farms are most concentrated.

A RenewableUK spokesman added: “The industry is working closely with the Government to ensure that innovative solutions are rolled out at speed, such as new energy storage capacity, to add more flexibility into the system”.

A Department for Energy Security and Net Zero spokesman said: “After years of historic underinvestment, we are delivering the biggest upgrade in Great Britain’s electricity network in decades to minimise constraint costs, delivering clean power by 2030 and helping bring down bills for good.

“We are working closely with Neso, Ofgem and industry to further improve the system as part of our Reformed National Pricing package.”