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Podcast S15E03

The Curtailment of Wind Generation

The Curtailment of Wind Generation

In this episode we’re looking at a controversial and complex topic –the curtailment of wind generation. Wind curtailment is when the output of wind plants is reduced to below its maximum generation capacity. This has been happening for many years, but with net zero targets and dynamic changing energy systems, it’s increasingly getting attention.

As usual host Jon Slowe is taking a well-earned holiday, Charmaine Coutinho is talking with two Delta-EE colleagues – Jon Ferris, Head of Flexibility and Storage, and Chris Matson, Partner at LCP Energy.

Episode transcript

[00:00:19.390] - Charmaine

Hello and welcome the new episode of Talking New Energy. Your usual host, Jon, is on a well earned break, so today you have me, Charmaine. Some of you listeners will be familiar with me and I’m very pleased to be back with you all again. Today in this episode we’re going to be looking at a controversial and complex, they're always the best I find – the curtailment of wind generation. For those of you who are not active in this bit of the energy market,  wind curtailment is when the output of wind turbines, low carbon generation technology, is reduced to below its maximum generation capacity. Curtailment has been happening for many years, but with net zero targets and a dynamic changing energy system, it’s increasingly getting more and more attention. Before we get going, it may be useful to put wind power into context. Total European potential of on and offshore wind is estimated to be in the tens of terawatts, with around 400GW installed today. That’s a lot of potential for helping to reduce carbon emissions. Today, I'm going to be talking with two of my colleagues at Delta-EE. Jon Ferris, who heads up our flexibility and storage research, and Chris Matson, from our new partner, LCP Energy. We’ll be discussing how this is evolving, using the UK as a really, really interesting example.


Let’s say hello. I'm going to give a quick hello to Chris. Hi, Chris.


[00:01:27.800] - Chris

Hello. Hello to all our listeners.


[00:01:31.030] - Charmaine

Yes, second time on the podcast, so maybe a quick intro for those that might have missed your first episode.


[00:01:37.810] - Chris

Yeah. So my name is Chris Matson. I head up LCP Energy’s, long term energy market analysis and modelling. So, look, long term looking a long way into the future, I guess. And I guess LCP recently acquired Delta-EE, so we're now working together across a range of projects and I guess my focus has really been on the modelling of the UK electricity market.


[00:02:07.410] - Charmaine

Super. It's always nice to have modellers on, I think. And Jon, hello and welcome back. Do you want to give a quick intro to you guys? I think I might have stolen your thunder, actually, but in your own words.


[00:02:17.560] - Jon

Thank you, Charmaine. And I guess it's not obligatory to have at least one Jon on the podcast, but I'll do my best. I head up our flexibility and storage research services.


[00:02:32.650] - Charmaine

Great to have you back and thank you both for your time today. So, Jon, I'll start with you. I'll gave a very quick definition of curtailment, but could you expand a bit more and maybe give listeners a quick overview of what wind curtailment is and why it happens?


[00:02:46.390] - Jon

Yes. So curtailment is simply instructing a generator not to generate when it would otherwise choose to do so. Now, there are two reasons why wind is typically curtailed. First of all, it's that wind generates when it's windy, not necessarily when there's demand for the energy to be produced. So there's typically lower demand overnight and frequently in the early morning when it's windy. There is excess generation for the whole system to cope with. The second reason is that wind is usually located where it's windy, and in some countries, say the UK, it's typically windy in Scotland and in the islands. Similarly in Germany, there's a north south divide where the wind generation capacity is higher in the north and demand is in the south. And as a result, when it's very windy, there can be insufficient network capacity to take the power from where it's generated to where it's needed. As a result, then, either the wind is simply curtailed, it's prevented from generating, or the wind is subject to redispatch, where the wind that's not allowed to generate has to be replaced by the system operator also paying another generator to turn up where it's required.


[00:04:20.410] - Charmaine

Okay, so it's where there might be too much wind or wind in the wrong place and it sounds like there's a double edged sword, or having to make that up with somewhere else in another bit of the country. Okay, I think that's a good recap. I'm not sure, but maybe we'll come back to you. So, Chris, Jon's giving us quite a nice little intro there. Could you kind of give us a bit more detail about how this actually happens in Britain? So how does someone actually how does the grid actually cause curtailment to happen?


[00:04:52.750] - Chris

Yeah, sure. So I guess, as Jon has kind of described, one of the main reasons that curtailment happens is when capacity is located a long way from demand and network capacity is not sufficient to transport it to consumers. In Britain, that occurs most often due to high levels of wind capacity in Scotland and high levels of demand in England and insufficient network capacity between that generation and that demand. Now, in terms of how that sort of takes place in terms of the actual market, so the wholesale market in the UK is unconstrained and is dispatched in an unconstrained way. So what that means is that when energy is bought and sold through the wholesale market, so, for example, in the day ahead auctions that take place a day in advance of delivery, there is no consideration for those constraints on the network. And so when capacity can sell its power in the day ahead market to consumers at the market price, and there's a single market price for the whole of Great Britain, and then that obviously potentially creates a problem when you then get closer to real time and there's going to be physical constraints on the network of actually getting that power to consumers.


[00:06:12.930] - Chris

So in GB, that's the job of the system operating National Grid here to turn plants up and down in order to ensure that all of those network constraints are satisfied. And that's done through plants submitting bids and offers through the balancing mechanism. So the balancing mechanism fills a few different roles in the UK, but one of those is to allow National Grid to resolve any constraints on the system. So typically what you might see is wind plant in Scotland say bidding to turn down and in actual fact will often be bidding at negative prices, so effectively being asked to pay to turn down. And the reason that they'll be demanding those negative prices or asking for those negative prices is that when they don't generate, they don't receive their renewable support payments. So when they're not receiving those payments, they'll need to make up for that through the payments that they get, through the balancing mechanisms being turned down. And then as Jon was saying, you're having to turn something else up. So you have offers from plants in other parts of the country, potentially gas plants in England who are offering to turn up and that's, National Grid then takes those actions as well. And there's obviously a net cost there too, which ultimately gets passed on to consumers.


[00:07:33.260] - Charmaine

Okay. And just so I understand, all of these bids and offers all happens in the day before, in the day before market, is that right?


[00:07:43.570] - Chris

It's happening throughout the day potentially. So it's right -  anywhere between the day ahead stage and right through to real time through that balancing mechanism.


[00:07:55.030] - Charmaine

Okay. And I think as far as I'm aware, that for the National Grid to the transmission network. Jon, is it a good time for us to maybe look at what happens in the distribution side of the network?


[00:08:09.560] - Jon

Yes it is, because it works slightly differently on the distribution network where you often have smaller generators. So either small wind farms or single turbines that don't necessarily participate in the balancing mechanism. They don't have the same connection regime to the transmission grid. Where in the UK transmission connection process is called connect and manage. Where every generator that connects is financially firm and is addressed through the bids and offers that Chris described. On the distribution grid, which was typically built for demand and to enable the flow of power from the transmission connector generators to consumers. It's a different mechanism. When renewables first appeared, it challenged the approach which was to give connections a firm connection so they had the right, as long as they were generating, to put power onto the grid. The assumption was that being located closer to demand that any generation on the distribution grid would reduce the net load and be beneficial to the grid. And that was fine up to a while, until the growth of renewables in some locations was so high, typically in the Scottish islands or the southwest of England, where it's sunnier, so for wind in the north and solar in the south, but you started to see reverse flows on the power grid.


[00:09:52.770] - Jon

So rather than reducing imports to a particular area, power started to flow back out of the distribution grid and in some cases reach the point where it exceeded the hosting capacity of that part of the network, so that the exports were greater than the network was built to cope with. The response to that was quite blunt and renewables were stopped from connecting to the grid. So in the windiest parts of Scotland, particularly in the Orkney Islands, there haven't been any new wind turbines since about 2012 or 2013. That's clearly not a sustainable situation as we try to increase the renewables on the grid. So the distribution operators have tried a number of different approaches and the one they've largely settled on is one that allows renewables to connect to a constrained grid if the operator has the right to curtail it when it's reaching capacity, or when the flows on the grid would cause a problem.


[00:11:10.490] - Charmaine

Okay, let me recap on this. So too much, curtailment happens when there's too much wind in the wrong place geographically, but also at the wrong level. And there's been a couple of different instruments that we use which are some are more sophisticated than others, I suppose. So that's really interesting. And I can see, you can see why, how as you mentioned, renewables only need to increase with our lower emission targets. And I think I read somewhere that the wind capacity of Europe last year, although the total annual capacity at the moment is around 250 gigawatts, if we think about the potential capacity, there's a big opportunity for wind, I suppose. But what you've just described, it really feels like this need for curtailment is only going to get bigger. Can you give a sense of how big that is? And I suppose where it is so I would assume the transmission is big wind and the distribution is small wind, but I don't necessarily think it's necessarily true. Chris, maybe you first.


[00:12:16.850] - Chris

Yes, I guess we did some analysis recently looking at how much of a problem this has been over the last couple of years. And in total there was 5.8 terawatt hours of wind curtailment across 2020 and 2021. So across those two years, and to put that in context, that's about enough to power 800,000 homes in each of those two years. In terms of costs to the consumer, it was around £300 million in 2020 and over £500 million in 2021. So again, significant amounts of money and most of that cost, most of that £500 million is not the cost of turning the wind down, it's the cost of turning something else up to take its place. So particularly in the latter half of 2021, we saw big increases in gas costs, the cost of turning gas plant up to balance out the wind that you're turning down. And in terms of looking forward, National Grid have done their own analysis and they expect those costs to be over £2 billion by later this decade. And I think that analysis was done before the government increased its ambitions for the amount of offshore wind in particular that's expected to come on the system.


[00:13:26.050] - Chris

So some really big numbers there. And I guess in terms of the location. Over 80% of those costs that I talked about over 2020 and 2021 were associated with the curtailment of Scottish wind. So at the moment it's mainly a Scotland / England problem, although in the future, in the future there will be other areas of the country that potentially start to become constrained.


[00:13:50.830] - Charmaine

Feels like it should all be resolved with a rugby match, but maybe not. Jon I don't know if you've got a perspective on the distribution balance because of the smaller scale renewables where there's a lot of interest, is that going to give us more problems when it comes to curtailment wind?


[00:14:09.890] - Jon

So this is one area where the data is much harder to come through than for the transmission network. It is a growing problem and it is quite widely known in particular areas, largely due to constraints on the grid, where renewable developers either simply can't get a connection or they're now having to wait for years to connect a project that otherwise would be ready to go. The regime that they connect through gives them a discount to a firm connection, so it's not price driven. When they are curtailed, they get the upfront discount, but if they can't even connect to the grid, then this discount is of no value to them.


[00:14:57.690] - Charmaine

Yeah, I mean, this feels like a really good time to talk about kind of winners and losers. So we talked a little bit about people being paid to turn up and people paid to turn down. So there's like a financial benefit or loss there, but it feels very complicated. Do you guys have any kind of feelings of other winners or whether any of the people who are kind of being paid that was it £500 million, Chris, who those are and what the other kind of winners and losers are when this happens?


[00:15:32.910] - Chris

Yeah. So I guess the wind that's being paid to turn down is at least theoretically is mainly breaking even. So it's just recovering the costs of the support payments it's losing. And the gas that's being turned up should, as part of the kind of balancing market or the rules associated with the balancing market, should be only really recovering the costs of those turned up. So no one's really should be anyway, making huge amounts of money from this. So really, in some ways there are mainly losers, which is the fact that the consumer is having to foot the bill of having to run more expensive generation when if the network had been reinforced to a greater level than if the wind had been in different places, then those costs wouldn't have been there.


[00:16:20.250] - Charmaine

Okay, so Jon, I don't know if you got anything to add, but just sounds like there's a kind of a need to reduce the amount of curtailment we do, but maybe I've got a hold of the wrong end and stick here.


[00:16:28.460] - Jon

Yes, I think that's the ultimate question as to whether curtailment is the best solution to this challenge or whether there are other approaches that could be taken. And there's a big discussion. We've mentioned the problems in Germany as well about the redispatch mechanism, whether they should move to a market based redispatch because the costs, even before the rise in wholesale prices for redispatch, were heading into the billions. And they are borne by consumers who are the ultimate losers. If we can't find a better way to deal with the curtailment of renewable generation.


[00:17:06.930] - Charmaine

Yeah. So have either of you guys seem any kind of more interesting initiatives or ways of reducing this need? I'm always a bit I was saying to Jon earlier, policy is not my happy place, but I’m happy to talk about it. But I like to see what the market is going to do when it comes to these kind of problems. Is there anything of interest that you guys have seen? Chris? Oh, Jon, I'll go to you first because I've gone to Chris first before, thanks.


[00:17:33.020] - Jon

I've been involved in a number of projects looking at how to implement alternative solutions to distribution curtailments. One was before I joined Delta EE when I worked for a company called Electron, who had a project in Orkney which has wind capacity that's greater than 100% of demand and is connected to the Scottish mainland by two relatively small cables. So the wind generators are unable to generate and frequently curtail, sometimes up to 50% of the time in some extremes. So the concept behind that project was to create a market where using the network signals, so facilitated by monitoring of the network by the local DSO, wind turbine operator could be informed that curtailment was likely to occur in the near future. And they could then trade with local demand side flexibility and there's quite a lot of storage heaters on the island in order to increase demand and prevent the wind turbines from being curtailed. So it would be a way of consumers getting a discount on the cost of heating their homes by soaking up the energy that would otherwise have been curtailed. The generator gets to generate and both should win in that situation.


[00:19:09.570] - Charmaine

So for any of our listeners who are not familiar with Scottish geography, Orkney is a very remote Scottish island, very beautiful, but also very windy and very cold. So turning up your storage heater is probably a very good solution and probably much needed anyway. Jon, carry on. Sorry.


[00:19:27.270] - Jon

So there's another project that Delta-EE is currently working on also with Electron and AFRY and the DSO Electricity North West, which is looking at taking the concept of having a curtailment queue and allowing assets to trade between themselves to trade to find the best solution. At the moment, if you want to connect a wind turbine to a constrained area, then you go into a process known as last in first off. So if you're the last generator to connect, you're the first one that's going to be curtailed. And if you're a modern, more efficient turbine, it does mean that we are then more likely to be curtailing assets that are more efficient than some of the older ones that are allowed to operate. And thermal generators, whether it's coal or gas that connected prior to this regime and have a firm connection, aren't curtailed at all and allowed to generate as they wish. So the concept behind that project, which will run for the next three years, is to allow, first of all, the renewable generators to trade between themselves and reorder the queue to make it financially beneficial for everyone. And then there's potential to bring in both firm generators who might be willing to voluntarily curtail and allow the wind to generate.


[00:21:01.350] - Jon

And eventually you could even bring in demand side assets and create a local market for flexibility to enable that excess generation that would otherwise be wasted, to be consumed, benefiting both the consumers, the generator and the network.


[00:21:23.550] - Charmaine

What you described just sounds like you're starting to bring in a lower carbon element into how we choose to curtail or not curtail, because we don't currently at the moment too much. Right?


[00:21:37.230] - Jon

It is. It's looking to enable any asset that's able and willing to participate to trade with any other. And that's a very new approach on the distribution network where they've typically operated as a passive network operator, building out the network in order to meet growing demand rather than having to manage it more actively to manage the balance between generation and demand on that part of the network.


[00:22:11.330] - Charmaine

That's a really good point, actually. So that's been looking at the distribution network. Chris, have you seen any kind of innovations on the transmission network?


[00:22:21.390] - Chris

Yes, I guess National Grid has been running a few different, what they call pathfinders constraints, management pathfinders, where they've looked at ways of essentially running the network closer to its full capacity. So because of the fact that you could lose a network, part of the network at any given time, could trip or have a fault, you kind of need to run your network below its full capacity to allow for the possibility of that happening and I guess to stop to run that closer to full capacity. They've got generators on these kind of standby contracts that they themselves will turn down very quickly in that situation so that you can actually use closer to your full capacity of the network. So that's one innovation that we've seen quite recently, I guess, looking forward, those sorts of things are important and using what you've got close to its full capacity and more efficiently is important. But looking forward, this problem is only going to grow and really there's going to need to be kind of, I guess, larger kind of scale things to deal with these sorts of problems. So on that side of things, you've got reinforcing the network itself.


[00:23:31.250] - Chris

So building more network capacity and National Grid has a lot of plans to do that over the next decade. But it's one of the issues in the UK is that planning process of going from identifying a need for that reinforcement to actually coming online is sort of five to ten years, if not maybe more. Storage has a role to play. So particularly longer duration storage where you can essentially charge the storage asset based on that excess renewable generation energy and then discharge in a period where you don't have excess wind. And similarly finding uses for that excess energy. I guess one that has potential again in the longer term is green hydrogen production. So using electrolyzers to produce green hydrogen and using that green hydrogen somewhere else in the economy, potentially back into the power system to generate power at a different time of the year. So there's a few of the kind of...


[00:24:33.400] - Charmaine

I like the last example because it starts putting all of these things in the context of the whole energy system both from power and gas and heat perspective. Okay, well, I'm just looking at the clock and I think we're going to have to move on. But thank you for that. I think hopefully it's given our listeners a really good overview of curtailment. I think the UK is a really good example because of our kind of weird geography, but also the extremities of and the progress that the grid is making in various different ways. Now, usually at this time, Jon brings out his talking new energy crystal ball but because me and it's not Jon, I think I'm going to go off piste and make it a wishing well. So I'm going to ask both of you two questions. One, if you could either change or accelerate one thing that we've discussed today, what would it be? And second question, what would you see the biggest challenge in doing that? Chris, I'll go for you first.


[00:25:35.590] - Chris

So I think just reinforcing the network faster. That thing I mentioned, we basically have had network reinforcement capacity, has lagged behind renewable deployment. And I think rather than trying to put some kind of restriction on renewable deployment, I think it would be better if we could just reinforce the network faster and if it didn't take five to ten years or more to go through that full planning process. So that would be my wish, I think. And to be fair, the government did identify that and is looking to reduce those kind of planning restrictions as part of its energy strategy.


[00:26:13.930] - Charmaine

We might see that one happen.


[00:26:15.580] - Chris

We might see, yes.


[00:26:16.820] - Charmaine

Jon, over to you.


[00:26:18.700] - Jon

So, taking the second question first, I think one of the key challenges is accepting that curtailment of renewables is going to be a feature of the future energy system. There is still value in increasing the generation capacity, even if it doesn't produce when everything else is producing, because there's little value in that power that's being produced. By the next turbine on the grid. However, when it's producing in the shoulder periods where there is demand that's not met by generation, then you can still add value to the grid and to consumers. And that then creates an opportunity that Chris described as how can you create new uses for that power that would otherwise be curtailed. And here I think I'll throw three coins into your wishing well. The first would be to have incentives for local consumption of the excess power. To enable that, I think there is a greater need for two-sided markets. So moving away from the single buyer ancillary services where the DSO is the only one that's able to trade to markets that are much more participative, where storage can either be buying or selling, where demand side flexibility can also participate with generators.


[00:27:54.110] - Jon

And finally, to pick up on your point about the whole energy system, I think it is that overlap between electricity and heat. But if we can harness the ability to store energy as heat and release it into people's homes, all for use in industrial processes, charging up those heat batteries when there's excess generation, that's likely to be a big opportunity in the future.


[00:28:30.790] - Charmaine

Yeah, I think that would be a great one for that to come through, being able to complete the circle. Well, I'll finish off today by thanking both of for your time. So thank you Jon, and thank you Chris. Jon will be back soon, but thank you again to all the listeners as well for your time. Hope you learn something today.


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