This sounds like a green scheme cooked up by Al Gore.
First, raise the alarm over “global warming,” make a national commitment to provide subsidies to develop wind power to generate renewable “clean energy” with a minimum carbon footprint and then subsidize wind-farm owners and investors to not only periodically power down, but pay them more than they would earn if they continued operating.
Such was the arrangement last year for wind farms in the U.K., the London Telegraph reported.
So called “constraint payments,” averaging $2.7 million a week to the owners of giant wind farms, totalled $146 million in 2017, up from less than $8 million in 2012. Over the past five years, wind-farm owners have been paid $496 million to not generate electricity – and ratepayers have seen over $496 million added to their bills for electricity they did not receive.
This perverse pricing scheme is the result of two factors: rapid growth of the industry by government encouragement, particularly in Scotland; and, Britain’s lack of capacity to handle all the power the U.K.’s wind farms produce. A think-tank study that revealed owners receiving 40 percent more cash when the turbines are shut down than when producing electricity labeled the arrangement “a scandal.”
Seven years ago, Scotland announced plans to meet half its heat, transport and electricity-energy needs from renewable sources by 2030. Already last summer, the nation’s monthly electricity consumption was surpassed by the energy generated by its wind-power network. Scotland’s weather is characterized by strong, steady winds on the North Sea that make it an ideal location to exploit the resource, and the government encourages it. Meanwhile, England has almost ceased expansion of its offshore wind farms.
But what to do when more energy is being generated than is being used?
This past fall, Germany’s approach to the problem was to pay its customers to use the surplus power which drove marginal prices below zero. In the U.K., the current solution is to turn off the turbines while paying their owners for their lost income.
“It is an absolute scandal. They make more per megawatt hour [unit of electricity generated] when they are told to stop generating than when they are selling electricity to consumers,” said Dr. Lee Moroney, head researcher on the study. Moroney works for the Renewable Energy Foundation, which showed wind farms being compensated $95 per megawatt hour (MWh) when the turbines are shut down and $66 per MWh in subsidies when generating electricity for the National Grid. Additionally, the wind farms receive the wholesale price for the electricity they generate.
The REF study noted that, despite the National Grid being unable to absorb all the energy produced by Scotland’s current windfarms, EDF Energy, which received one of last year’s largest constraint-payment subsidies, has filed paperwork to expand one of its major facilities.
A more economical arrangement for ratepayers would be for surplus energy to be captured and stored for later use. Batteries to do that are currently not feasible. Building dams and pumping water into their reservoirs for later use as hydro-power is a proven alternative, but suitable sites are required and the same environmentalists who tout wind power are usually resistant to building dams.
The National Grid calls constraint payments “the most economically efficient way of managing additional green capacity.” It ensures an incentive to have excess generating capacity for times when winds are low by compensating for lost revenue during surpluses and the wear-and-tear caused by turning the turbines off.
The problem with wind farms and distorted economic incentives is not limited to the U.K. or Europe. A study by the Institute for Energy Research noted that lucrative U.S. government subsidies to the industry, as well as mandates enforced by fines for grid operators to give preference to energy from wind-generated sources, have resulted in the closing of nuclear plants rather than coal- and gas-powered plants that output greenhouse gases. Nuclear plants are designed to run at full capacity around the clock. They can’t throttle their output just because there’s a temporary glut of energy. Wind power, aside from being unreliable, provides most of its energy at night and in the early morning when demand is low and delivers it into the energy stream at essentially a price of zero. The result is nuclear plants become less economical to operate.