The GMB union is calling for UK renewable energy subsidies to be funded via general taxation, describing the Renewables Obligation Certificate system as “unfit for purpose.”

According to the GMB, “every single one of the 27 million households in Britain has already had to fork out to wind farmers for not producing any electricity and that may be just the tip of the iceberg”.

The average wind farm receives roughly half of its income from the electricity wholesale price and half from subsidy via the Renewables Obligation Certificate (ROC) – the cost of which is passed on to consumers through their energy bills.

The comments come in the wake of an article in The Sunday Times last week drawing attention to “wind farms that lie idle and get millions."

The newspaper was following up on an online article on 10^th August by Dr. John Constable, Director of the the Renewable Energy Foundation (REF), which says that since 2010, wind farms have been paid £328 million not to generate – mostly to onshore Scottish wind farms. According to Constable, England’s offshore farms have also started "to get in on the act"- last year, the total was £82 million and this year it has already reached £50 million.

The REF previously reported that over the 2016 Christmas period, high winds accompanying Storms Barbara and Conor combined with low demand for electricity to deliver a “£7 million gift” to the owners of wind farms in the form of constraint payments.

Constraint payments occur when wind farms are paid not to generate, usually in periods when wind generation is surplus to demand. The bulk of the payments are made when wind generation cannot be used in Scotland, and there is insufficient grid capacity to export the energy to England.

The cost of the payments is borne by electricity bill payers throughout the United Kingdom.

"Wind farms make more money when constrained off the system than when generating normally"

According to the REF, the big earners were Scottish Power (SP) and Scottish and Southern Electricity (SSE) which made £3.5 million and £2.5 million respectively over the Christmas period. A total of 35 wind farms shared in the windfall - Whitelee (owned by SP) and Clyde (SSE) were the most heavily constrained taking £1.9 million and £1.2 million respectively.

Several wind farm companies increased the prices they charge to reduce wind farm output during 2016. The price for Clyde wind farm was increased by nearly £3 per MWh on 13 December 2016 to £69. The REF said:

“The price charged is to compensate for the subsidy forgone when a wind farm is constrained off the grid; this is currently £45 per MWh, so the payments actually exceed by a large margin the income lost, meaning that wind farms actually make more money when they are constrained off the system than when they are generating normally.” 

According to the REF, the owners of Clyde claimed an extra £24 per MWh for “unexplained reasons” - £3 of the rise occurred just prior to the Christmas storms.

52 wind farms in the United Kingdom now receive constraint payments; 37 are onshore, all of which are located in Scotland. To date, these have received a total of over £274 million from electricity bill payers for not generating.

The REF said:

“Large scale deployment of wind farms in the area of greatest constraints continues apace. The justification for the prices charged for reducing output remains opaque and while this is the case the opportunity for exploitative pricing continues.”

“There is a perverse incentive to locate wind farms in Scotland”

The REF has consistently argued that the compensation to wind farms should be capped by the regulator at the subsidy income lost.

There are currently about 750 wind farms north of the border, with roughly 3,000 wind turbines. Their total generating capacity amounts to 5,700 MW - at its maximum, the wind capacity is more than the 5.5 GW peak demand on the Scottish grid.

In the article, Constable and co-author Matt Ridley argue that:

“The result is that there is a perverse incentive to locate wind farms in Scotland, even though they aren’t welcome and the grid can’t take their output. In fact, some wind farms that are already being “constrained off” on a regular basis are considering major extensions to their capacity.”

Environmental levies on consumer bills set to treble between 2015/16 and 2021/22

According to forecasts in the Office for Budget Responsibility’s Economic and Fiscal Outlook published in March 2017, environmental levies on consumer bills are set to treble from £4.6 billion to £13.5 billion between 2015/16 and 2021/2

Justin Bowden, GMB National Secretary for Energy said:

“With the green subsidies on everyone's bills set to treble within 5 years to £10 per week, GMB is calling for this to be paid for through general taxation along with an urgent investigation into the wind power rip off racket that is lining the pockets of big companies at the expense of every single energy bill payer and household in the country.

"Electricity is a natural monopoly and in this case the public are being milked by paying twice over - through spiralling consumer energy bills and taxpayer hand outs.

"The renewable obligation certificate system rewards and punishes the wrong people and appears unfit for purpose.”

"Where energy subsidies of any sort can be shown to be justified and in the public interest, then GMB says they should be be paid for out of basic taxation - a much fairer and more progressive way."