‘Scottish wind farm paid £96M to switch off’ is an example of a newspaper headline that particularly irks people who find wind turbines ugly, as well as being deeply puzzling to many. Why pay someone to switch off?
The Western Link is an undersea cable that aims to reduce or eliminate such problems. New research by Mario Intini and Michael Waterson asks: has it worked, and if not, why not? Their study finds that it has only been a very limited success. One of the problems is the behaviour of wind farms. Given this, additional controls would improve matters.
Throughout Europe, wind power has been growing rapidly; indeed, it has achieved a quarter of total electricity production in Germany, for example. But wind power generation has two problems: it fluctuates widely as the wind speed differs; and it is often windiest in areas remote from the population.
Because electricity supplied must always equal electricity demanded, the system operator needs to maintain a careful balance between what is flowing from generators through the pylons and demand. Given this context, significant growth in wind farm generation in remote parts of Scotland, poorly connected to more populous areas, has created a problem.
National Grid, seeing the problem of needing to tell wind farms not to produce, but faced with opposition to running pylons through swathes of Scottish and Borders landscape, decided to build the Western Link, a subsea interconnector that does the job of moving this power to where it is needed.
Unfortunately, it has been subject to several significant failures over the two years it has been in operation. The downside is that payments are higher when the Link is not working. The upside for research is that, after controlling for other factors, it is possible to evaluate how much the Link saves in payments to Scottish wind farms when it is operating.
The answer is, in round figures, £45M a year, this research suggests, if it worked all the time. This is worth having, but pales beside the cost of the interconnector, said to be around £1.2 billion.
Why is it not saving more? Here we enter one of economists’ favourite areas, the role of incentives. A naïve view would be that, when a wind farm can produce, it will, because the wind is free. But this neglects the subtlety of the system, in which the incentive of a wind farm is to maximise its revenue.
The authors show that wind farms offer to produce more, relative to a forecast based on wind speeds, when the price obtained is relatively high, when the penalty for failing to produce what was offered is relatively low, and when predictions of the price paid to a farm forced to switch off are high.
In fact, the last of these – payments to persuade them to switch off – have been running at very high levels, and continue to do so, so that it can be more valuable to commit to produce, but be told not to, than actually to be paid for generating electricity.
Is this a purely domestic economy issue, due to the quirks of the British system? Arguably not. Britain is by no means alone in having a grid system based on the idea of bringing power from large power stations stationed alongside major rivers to populations and industry not far distant. Germany has found much the same problem in its rapid dash to install renewable energy, there significantly from solar power as well as wind.
Converting the system to a ‘new normal’ of increased renewable power, for important reasons relating to climate change, reveals many problems in its wake. Increased interconnection is part of the answer, but reforming the payments made to operators is just as urgent. In doing this, clearly operators will optimise relative to the constraints of the system, meaning solutions need to bear this in mind.
ENDS
Mario Intini (University of Bari and Michael Waterson (University of Warwick)
Contact: Professor Michael Waterson, University of Warwick, Michael.waterson@warwick.ac.uk