The national grid operator has cautioned about escalating costs as it struggles to keep up with the growth of renewable energy sources. According to the operator, British households could face expenses of up to £3 billion each year to compensate wind farms and other electricity producers for ceasing generation.
The National Energy System Operator (Neso) has highlighted the impending financial burden as the power grid finds it challenging to accommodate the rapid expansion of renewables.
When strong winds generate excess power that overwhelms transmission lines, Neso must intervene. To mitigate these issues, Neso provides wind farm operators with “constraint payments” to halt generation, thereby compensating them for lost revenue.
Last year, these payments reached £1 billion, and a recent Neso report warns that this cost is expected to rise to £3 billion by 2030. The report states:
“In certain sections of the network, new renewable energy sources come online earlier, sometimes before the corresponding network capacity is established. In such instances, when generation output exceeds the existing network capacity, we compensate generators to reduce their output.”
Additionally, other industry experts are concerned that the actual costs could be significantly higher. Octopus Energy, the nation’s leading power supplier, estimates that by 2030, constraint payments might add £6 billion annually to consumer bills, which is roughly equivalent to £200 per household.
In 2019, constraint payments amounted to approximately £242 million for consumers, but this figure quadrupled to £1 billion last year. A significant portion of these funds was directed towards compensating northern wind farms to cease operations.
An Octopus spokesperson commented, “Based on data from Neso, it is estimated that if the current situation persists, the costs of maintaining this inefficient system could exceed £6 billion by 2030.”
Neso stated that it is striving to minimize expenses: “We are continuously exploring new strategies to reduce the costs associated with balancing electricity supply and demand on a moment-to-moment basis, as these costs are ultimately passed on to consumers through their electricity bills.
“For the 2023/24 period, the total costs for constraint payments represented roughly 2.4% of a consumer’s bill.”
