Inadequacies in the transmission grid mean consumers are paying generators to switch off. We need to get smarter with our clean energy resources.
In almost any retail environment paying for a service you didn’t receive would prompt stern words. In the electricity sector, not only are consumers paying for energy they don’t get, it’s energy that isn’t even produced. Every year UK consumers spend hundreds of millions of pounds to turn off renewable energy generation.
The issue is not renewable generation itself but rather the inadequacies of the transmission grid. Much of the UK’s renewable capacity is based in the north of the country, in Scotland, where wind speeds are typically higher or offshore. However, electricity demand is concentrated in more densely populated areas much further south. A lack of grid capacity connecting wind production with demand centers means that on windy days, when renewable energy production is nearing the maximum, the transmission system simply can’t handle the power, and generators are paid to switch off. According to widely reported figures, this so-called curtailment saw UK consumers pay wind farm owners £215 million last year not to generate some 3.8 TWh of potential energy. This was the equivalent of about 6% of the total wind energy generated. At the same time, a further £700 million went into replacement power from gas turbines.
This issue isn’t limited to the UK alone; many other countries face similar issues. Without substantial grid capacity investment, it is a problem that will only become more costly as renewable energy generation ramps up. Indeed, in February, research from RenewableUK recorded a UK pipeline of offshore wind projects of close to 100 GW, and National Grid ESO forecasts put curtailment costs at close to £2.8 billion over the next two years.
It should be recognized that building enough transmission capacity to eliminate curtailment is not realistic, given the investments required. But there is also mounting evidence that new transmission capacity represents better value when considering curtailment costs and broader considerations such as energy security and our Net Zero commitments. However, there are potentially other opportunities to reduce the cost of curtailment for consumers. Ramping up energy storage capacity is one option. At the same time, new sources of demand like the electrification of transport and growth of EV use or even hydrogen production are all possibilities that are on the horizon.
Ultimately, we need to find more innovative ways of managing the network and targeting network investment to benefit from maximizing the use of our renewable energy resources.
