ESO has already spent 1.6B on balancing costs so far this FY so likely to be in excess of 2B by year end and this ends up on our bills as well. So not only do we subsidise the unreliables we then have to incur more costs to manage the instability they cause to the system. Then not forgetting the ROC largesse as well at nearly 7Billion as well as the capacity market required to keep the CCGTs on the system. People juts have no idea how much extra they are paying for all this and that its wont get any cheaper when we have more wind it will be more. Unfortunately we wont be seeing an ITV drama anytime soon to really shine a spotlight on this madness.
Complex issue - there have always been balancing costs, but how much are attributable to wind (and solar) generators - has anyone done any work on this? In fact if, say 10 years ago, we'd abandoned wind and solar, and just built more gas stations. what would costs look like now? I've always thought of renewables as "gas-savers" but it's all financially mysterious how it all worked when gas prices shot up.
Yes, I have done work on it. My very first article. Update coming out on 21 Jan. In the meantime, here's the original. Balancing costs were about £0.5bn in 2011. In year ended Mar 2022, over £3bn and in year ended Mar 23, over £4bn. This increase coincides with the additional intermittent wind and solar power being added .
Fair comment but of the 1.6B 800m is down to managing system constraints where wind has to be curtailed and mainly gas used to replace it. Then we have ancillary services of c200m used to manage frequency now we don't have alt those 500MW coal fire sets with loads of inertia sitting on the grid soaking up fluctuations. I also believe most of the reactive and voltage support costs are due to the grid being built around the coal stations and now these nodes have no generation input it creates other challenges for the grid operator. All in all and unreliables source of generation has lots of extra challenges and thus costs for the ESO and this is what is not clearly explained to people. Ultimately the cost of net zero is going to be more expensive energy theres no getting away from that fact and politicians should just be honest about it.
Renewables have not been gas savers. They have eaten into the providers of baseload power - coal and nuclear, both of which have seen big declines over the past decade. However, because renewables are intermittent, they only displace some of that baseload, with the rest having to be made good by imports and gas. So although they displaced some gas use on windy days there has been an increase in gas use on windless days, with the result that the gas share is little changed.
Renewables depend on the balancing flexibility of gas.
I say "gas savers" because as wind output rises, gas falls (as seen every day on https://www.gridwatch.templar.co.uk/ ). What I can't get my head around is why wind generators are paid gas prices) In overview baseload generators are the issue as wind can't provide baseload power reliably. More nukes and quickly to remedy this. .
That may be so, but the big question is, how much gas does the wind actually save vs just dropping the wind and using much more economical, ultra-efficiency CCGT's running in baseload mode 24/7? I've read that's a >40% improvement in efficiency. Then add the curtailment & negative pricing losses of the Wind. Long distance transmission losses. Storage losses. And the biggest loss imaginable = Hydrogen. No wonder the Bentek study showed Wind in Colorado & Texas actually increased emissions/fossil consumption.
That's not quite true and depends upon the subsidy regime. Those funded by ROCs essentially get paid gas prices plus the ROCs they receive, so will always be more expensive. Those funded by CfD get the index-linked strike price no matter what gas prices are. Most of the time CfDs are more expensive, except for a short period in late 2021 and during 2022 when the gas supply crisis was at its height. See chart above.
Wind isn't paid gas prices. CFD wind farms get their strike price, and ROC wind farms get their ROC premium, which also is a basis for curtailment payment.
Gas tends to trade well ahead of delivery - it is effectively the main source of hedging for energy retailers and large users - with plants buying gas and selling power to lock in a margin. Wind tends to get priced close to delivery - the day ahead market takes a large chunk of volume - because it cannot risk being caught out with under or over delivery at disadvantageous prices in the Balancing Mechanism. Gas can provide additional flexibility, but that also comes from interconnectors which can also be price setters in the short term market. If the UK is short of power it must pay to import: this ceases to be about cost of generation and is all about paying enough so that others make do with less. If the Continent has a large surplus, then interconnector prices will go negative.
Of course you don't really see the long term effect of the erosion of coal and nuclear on a day to day basis. This chart has the picture:
Added a new chart now showing how subsidy per MWh has changed each month. Now back in the range it was pre-crisis, despite gas prices still being at the high end of the historic range.
Here the IMRP is just the time average (I should probably try to weight it by overall demand hour by hour, but getting a sensible series for that is difficult and entails repairing BM reports data). The recent trends are worth some comment.
This year, because OFGEM decided to lump BSUoS and TNUoS charges directly onto consumers instead of charging some to generators, several CFDs with clawback clauses didn't get their full indexation in April, with nearly £10/MWh taken off several. In fact, it took some months for LCCC to sort it all out, but the data has now been back adjusted at the daily level.
Biomass CFD generation has been having a tough time with the illiquid basis of setting Baseload Market Reference Price: essentially, it has been acting as a large tax so plant has only been run when there have been very high prices. The new winter price gives them a small payout from their strike prices, so generation has resumed and contributed to the fall in the recent overall average price which remains dominated by offshore wind. The late summer peak in offshore price must arise from lower priced generators having less favourable winds. However, the fall since then is largely the result of Triton Knoll commencing its CFD on the outstanding phase 3.
Its methodology is sound but its based on what the windy willows forecast they will generate and then using the ESO balancing instructions its comes up with a figure of lost output. There have been suggestions that the windy willows are scamming the system especially the ones that are connected to constrained parts of the network. They over forecast output and ESO then have to instruct them to curtail output which they still get paid for. Of course the real crime is why they've been allowed and still are being allowed to connect to constrained parts of the network. This is then forcing the ESO to say it needs to add more transmission capacity at a cost of billions which is bad enough but with the panning system as it is it then takes years to get approval.
Neither has yet managed to incorporate voluntary curtailment by wind farms faced with uneconomic prices either because they haven't taken up a CFD (also applies to farms in construction as well as Seagreen and Moray East), or because their CFD offers no protection - some CFDs pay nothing if day ahead prices are negative for six contiguous hours or more, and future CFDs will pay nothing for any hour of negative pricing).
They are ready to swallow the National Grid propaganda that everything is due to grid constraints. I doubt that is why Hornsea 1 has been paid over £150/MWh to curtail: that will be a combination of lack of demand, even via interconnectors, and also lack of inertia, which is another reason to curtail wind.
Adding to transmission capacity to try to reduce curtailment is an expensive venture. The number of hours when the extra capacity would sit idle is very high, meaning that the cost per MWh transmitted is much higher than for a link between a nuclear power station and its main areas of demand. Of course National Grid is interested in maximising its regulatory asset base on a guaranteed return, and sending us the bill. The messages we get are slanted accordingly.
Take a look at the AESO site, for Alberta in Canada, from 4400MW Wind capacity @ 1:42pm, 24MW generation that's 0.5% of capacity. And this is during a bad cold spell when both heat & electricity are max. With the two biggest cities, Edmonton & Calgary @ -33 degC. And solar is peaking @ 30% of capacity, so that isn't helping very much, that will make for a CF% of about 7%. Pathetic.
The fundamental problem is the wind supply, specifically wind droughts, in the European context the Dunkelflautes which in conjunction with the pathetic capacity of pumped hydro and battery storage eliminate any chance of giving up conventional power.
Given the price of gas the obvious answer is to burn coal in a fleet of new power stations.
Power will be cheap and reliable again.
Drop the subsidies and mandates for expensive, unreliable and ecologically catastrophic wind and solar power, then the facilities will be stranded assets.
The lack of attention to wind droughts up to the present time may be the big story of the decade.
But the average subsidy per MWh has dropped? That’s a good thing isn’t it?
Probably not. More wind on the grid increases balancing costs. And cost per MWh has gone up.
Fair point.
ESO has already spent 1.6B on balancing costs so far this FY so likely to be in excess of 2B by year end and this ends up on our bills as well. So not only do we subsidise the unreliables we then have to incur more costs to manage the instability they cause to the system. Then not forgetting the ROC largesse as well at nearly 7Billion as well as the capacity market required to keep the CCGTs on the system. People juts have no idea how much extra they are paying for all this and that its wont get any cheaper when we have more wind it will be more. Unfortunately we wont be seeing an ITV drama anytime soon to really shine a spotlight on this madness.
Complex issue - there have always been balancing costs, but how much are attributable to wind (and solar) generators - has anyone done any work on this? In fact if, say 10 years ago, we'd abandoned wind and solar, and just built more gas stations. what would costs look like now? I've always thought of renewables as "gas-savers" but it's all financially mysterious how it all worked when gas prices shot up.
Yes, I have done work on it. My very first article. Update coming out on 21 Jan. In the meantime, here's the original. Balancing costs were about £0.5bn in 2011. In year ended Mar 2022, over £3bn and in year ended Mar 23, over £4bn. This increase coincides with the additional intermittent wind and solar power being added .
https://davidturver.substack.com/p/exposing-the-hidden-costs-of-renewables
Fair comment but of the 1.6B 800m is down to managing system constraints where wind has to be curtailed and mainly gas used to replace it. Then we have ancillary services of c200m used to manage frequency now we don't have alt those 500MW coal fire sets with loads of inertia sitting on the grid soaking up fluctuations. I also believe most of the reactive and voltage support costs are due to the grid being built around the coal stations and now these nodes have no generation input it creates other challenges for the grid operator. All in all and unreliables source of generation has lots of extra challenges and thus costs for the ESO and this is what is not clearly explained to people. Ultimately the cost of net zero is going to be more expensive energy theres no getting away from that fact and politicians should just be honest about it.
Renewables have not been gas savers. They have eaten into the providers of baseload power - coal and nuclear, both of which have seen big declines over the past decade. However, because renewables are intermittent, they only displace some of that baseload, with the rest having to be made good by imports and gas. So although they displaced some gas use on windy days there has been an increase in gas use on windless days, with the result that the gas share is little changed.
Renewables depend on the balancing flexibility of gas.
I say "gas savers" because as wind output rises, gas falls (as seen every day on https://www.gridwatch.templar.co.uk/ ). What I can't get my head around is why wind generators are paid gas prices) In overview baseload generators are the issue as wind can't provide baseload power reliably. More nukes and quickly to remedy this. .
That may be so, but the big question is, how much gas does the wind actually save vs just dropping the wind and using much more economical, ultra-efficiency CCGT's running in baseload mode 24/7? I've read that's a >40% improvement in efficiency. Then add the curtailment & negative pricing losses of the Wind. Long distance transmission losses. Storage losses. And the biggest loss imaginable = Hydrogen. No wonder the Bentek study showed Wind in Colorado & Texas actually increased emissions/fossil consumption.
That's not quite true and depends upon the subsidy regime. Those funded by ROCs essentially get paid gas prices plus the ROCs they receive, so will always be more expensive. Those funded by CfD get the index-linked strike price no matter what gas prices are. Most of the time CfDs are more expensive, except for a short period in late 2021 and during 2022 when the gas supply crisis was at its height. See chart above.
Yes to more nukes.
Wind isn't paid gas prices. CFD wind farms get their strike price, and ROC wind farms get their ROC premium, which also is a basis for curtailment payment.
Gas tends to trade well ahead of delivery - it is effectively the main source of hedging for energy retailers and large users - with plants buying gas and selling power to lock in a margin. Wind tends to get priced close to delivery - the day ahead market takes a large chunk of volume - because it cannot risk being caught out with under or over delivery at disadvantageous prices in the Balancing Mechanism. Gas can provide additional flexibility, but that also comes from interconnectors which can also be price setters in the short term market. If the UK is short of power it must pay to import: this ceases to be about cost of generation and is all about paying enough so that others make do with less. If the Continent has a large surplus, then interconnector prices will go negative.
Of course you don't really see the long term effect of the erosion of coal and nuclear on a day to day basis. This chart has the picture:
https://i0.wp.com/wattsupwiththat.com/wp-content/uploads/2024/01/UK-Electricity-Percent-1705187372.8378.png
Note the switch back to coal in the aftermath of Fukushima, when LNG became expensive - now no longer an alternative.
Added a new chart now showing how subsidy per MWh has changed each month. Now back in the range it was pre-crisis, despite gas prices still being at the high end of the historic range.
Also worth looking at it the other way up:
https://i0.wp.com/wattsupwiththat.com/wp-content/uploads/2024/01/Production-weighted-CFD-Strike-Prices-vs-IMRP-1705188862.4059.png
Here the IMRP is just the time average (I should probably try to weight it by overall demand hour by hour, but getting a sensible series for that is difficult and entails repairing BM reports data). The recent trends are worth some comment.
This year, because OFGEM decided to lump BSUoS and TNUoS charges directly onto consumers instead of charging some to generators, several CFDs with clawback clauses didn't get their full indexation in April, with nearly £10/MWh taken off several. In fact, it took some months for LCCC to sort it all out, but the data has now been back adjusted at the daily level.
Biomass CFD generation has been having a tough time with the illiquid basis of setting Baseload Market Reference Price: essentially, it has been acting as a large tax so plant has only been run when there have been very high prices. The new winter price gives them a small payout from their strike prices, so generation has resumed and contributed to the fall in the recent overall average price which remains dominated by offshore wind. The late summer peak in offshore price must arise from lower priced generators having less favourable winds. However, the fall since then is largely the result of Triton Knoll commencing its CFD on the outstanding phase 3.
Thank you David for your very helpful, concise report.
I often look at this website: UK Wind Curtailment Monitor https://wind.axle.energy/
Are you familiar with it? If so, is it reliable and accurate?
Not seen it before, so no idea how accurate it is. Thanks for drawing to my attention.
Its methodology is sound but its based on what the windy willows forecast they will generate and then using the ESO balancing instructions its comes up with a figure of lost output. There have been suggestions that the windy willows are scamming the system especially the ones that are connected to constrained parts of the network. They over forecast output and ESO then have to instruct them to curtail output which they still get paid for. Of course the real crime is why they've been allowed and still are being allowed to connect to constrained parts of the network. This is then forcing the ESO to say it needs to add more transmission capacity at a cost of billions which is bad enough but with the panning system as it is it then takes years to get approval.
It's quite similar to the work done by Robin Hawkes
https://renewables-map.robinhawkes.com/curtailment
Neither has yet managed to incorporate voluntary curtailment by wind farms faced with uneconomic prices either because they haven't taken up a CFD (also applies to farms in construction as well as Seagreen and Moray East), or because their CFD offers no protection - some CFDs pay nothing if day ahead prices are negative for six contiguous hours or more, and future CFDs will pay nothing for any hour of negative pricing).
They are ready to swallow the National Grid propaganda that everything is due to grid constraints. I doubt that is why Hornsea 1 has been paid over £150/MWh to curtail: that will be a combination of lack of demand, even via interconnectors, and also lack of inertia, which is another reason to curtail wind.
Adding to transmission capacity to try to reduce curtailment is an expensive venture. The number of hours when the extra capacity would sit idle is very high, meaning that the cost per MWh transmitted is much higher than for a link between a nuclear power station and its main areas of demand. Of course National Grid is interested in maximising its regulatory asset base on a guaranteed return, and sending us the bill. The messages we get are slanted accordingly.
The article pertains to the UK specifically, yes?
Yes.
I love how nobody is supposed to notice the conflict between:
1) “Solar and wind are the cheapest forms of energy” and
2) “We must increase subsidies to solar and wind”
Do they think we are stupid?
Take a look at the AESO site, for Alberta in Canada, from 4400MW Wind capacity @ 1:42pm, 24MW generation that's 0.5% of capacity. And this is during a bad cold spell when both heat & electricity are max. With the two biggest cities, Edmonton & Calgary @ -33 degC. And solar is peaking @ 30% of capacity, so that isn't helping very much, that will make for a CF% of about 7%. Pathetic.
http://ets.aeso.ca/ets_web/ip/Market/Reports/CSDReportServlet
Even lower @ 3:30pm, Wind @ 15MW. Solar down to 300MW of 1650MW capacity.
Even lower @ 3:54pm, Wind @ 8MW. Solar down to 184MW.
Even lower @ 4:46 pm, Wind @ 7MW. Solar down to 1MW.
And AESO has announced a Grid Alert.
Now Alberta wind is at 8 and solar 0. And they have 6131 MW of combined installed solar and wind.
Yowzers! Wind is on the rise! We are saved!
We’re doing a piece on Alberta. It should come out tomorrow.
We are on the same page David - resitance is building now. It's most encouraging to see investors fleeing renewables in droves. https://austrianpeter.substack.com/p/alternative-energy-hype-hope-or-glory?r=hkcp6&utm_campaign=post&utm_medium=web
The fundamental problem is the wind supply, specifically wind droughts, in the European context the Dunkelflautes which in conjunction with the pathetic capacity of pumped hydro and battery storage eliminate any chance of giving up conventional power.
Given the price of gas the obvious answer is to burn coal in a fleet of new power stations.
Power will be cheap and reliable again.
Drop the subsidies and mandates for expensive, unreliable and ecologically catastrophic wind and solar power, then the facilities will be stranded assets.
The lack of attention to wind droughts up to the present time may be the big story of the decade.
https://quadrant.org.au/opinion/doomed-planet/2020/07/no-gusts-no-glory/