Calls have been made for the UK Government to close an “embarrassing” loophole that allows some wind-farm operators to name their own price as compensation for not operating.
The issue has been raised by the regulator Ofgem, but the Department of Energy and Climate Change (DECC) confirmed the loophole exists but will not name the exempted companies.
The revelation will intensify criticism of a system that effectively makes consumers pay millions for generators not to generate. A plethora of wind farms has been allowed to start feeding the national grid before it was ready to deal with the extra power.
Some firms with wind farms of 100 megawatts or less are benefiting from the administrative oversight, leaving taxpayers to foot the bill.
Dr Lee Moroney of the Renewable Energy Foundation said: “Ever since constraint payments to wind farms first began in 2011 there has been concern that the prices demanded were unreasonably high, and Ofgem actually introduced regulations to protect the consumer.”
She said it also meant wind farms with licence exemption were also exempted from the regulations controlling constraint prices. Dr Moroney added: “In effect, these wind farms can safely continue to name their price for not generating.
“And in fact very high prices, several times the lost income, are still common in the market. This bizarre situation, which is seriously bad for consumers and deeply embarrassing for the Government, should be addressed immediately.”
Energy regulator Ofgem has raised the problem that began as many wind farms have been allowed to start feeding the national grid before it was ready.
National Grid makes payments to wind farms to shut down when demand is low or wind output is high.
The Herald reported last week how in 33 consecutive days many operators in Scotland shared nearly £6m of payments not to generate electricity. They are expected to stay high until more power can be transmitted to consumers in England.
Wind-farm operators are required to hold electricity generation licences and the constraint payments are covered by the associated Transmission Constraint Licence Condition (TCLC).
A DECC spokesman said: “All generators 50MW or below are automatically licence-exempt under the class-exemption regime. DECC can give individual licence exemptions to generators between 50MW-100MW.”
He added that as a result the TCLC prohibition on excessive demands did not apply in these cases.