Why Wind Farms Are Paid Millions to Turn Off

Over the last few decades, thousands of wind turbines have popped up in remote regions of the UK.

There's been a huge surge in renewable generation in the UK.

That's my colleague Todd Gillespie. He's done a lot of reporting on energy markets for Bloomberg and he says that in particular, wind power in the UK has exploded.

That's largely driven by very deliberate policy measures that were taken by successive governments and largely to take advantage of the vast resources that we have in the North Sea and in Scotland.

And Todd says this ballooning of the country's wind power capacity it's directly related to subsidies from the UK government.

These projects take a long time to build, right, So what the government did is said right will basically guarantee you a revenue price per megal hour of power that you produce way out in the future. Once these projects are built, once they're up and running, you can have a fifteen year contract from the moment they start going forwards and you can basically be sure that you're going to get your return on investment.

And at first glance, these investments seem to have paid off. Just sixteen years ago, a little more than one percent of the country's electricity came from wind power.

But last year in December, we produced over forty percent of our power from wind, which when you talk to people on the street, they don't quite realize quite how clean our energy system is compared to a lot of other countries.

But beneath those massive strides in renewable energy infrastructure, something is lurking. Today on the show How a team of investigative reporters at Bloomberg uncovered a problem within the UK's green power industry that's costing consumers millions of pounds per year and what it means for the country's green energy future. I'm Sarah Holder. This is big take from Bloomberg News. Before we explain what our colleagues uncovered, it's helpful to know a little bit about how wind farms work.

Most of the wind farms in the UK are located in Scotland and off the Scottish coast. That's where most of the windows and there's lots more space there build them.

That's Gavin Finch. He's a member of Bloomberg's investigations team and he and Todd work together on this project.

But most of the consumption is in England, so that energy needs to travel south to where the people are.

To move power across the UK, the country relies on a network of transmission.

Lines, huge cables that come along the backbone of the country, and then they get taken down into smaller and smaller cables through distribution networks and then into really local networks and into people's homes, into factories, into businesses, and into your street lights and everything outside your house as well.

That network of transmission lines is what's known as the grid.

The UK grid is very outdated. It was built decades ago, kind of designed around big gas powered power stations.

One of the challenges is that you need more grid, more cables and pylons to handle the rise in power generation that countries are experiencing. With power plants that burn fossil fuels like coal or gas, humans are in control of how much electricity is being created, but that can be trickier with renewable sources like wind. No one can control the weather, and when the wind blows harder, the wind turbines spin faster and generate more electricity.

So on super windy days there's just no way that all that energy can travel from Scotland to England without overloading those transmission cables.

The solution to this problem relies on projections. Every day, wind farms look at wind forecasts and have to tell grid operators how much power they expect to produce throughout the day. If conditions are calm and grid operators see there won't be enough wind power to meet demand, they bok to local gas fired plants to turn on and

So wind farms are paid lots and lots of money just to switch off, because otherwise everything would blow up.

That policy is known as curtailment and it's the heart of Gavin and Todd's investigation.

Crucially, that compensation is based on what these wind farms forecast they would have produced, so there's an incentive there to overstate your output because then you were going to be paid more money in compensation.

For Gavin Todd and the team. Their curiosity about these payments started with a tip.

So we had a source who told us that we should look at wind farms because he'd noticed that they were routinely overstating how much energy they said they were going to produce. You know, easy guy who's just very on top of the data, and that was just an anomally he spotted.

So they took that tip and went hunting for data.

Anything that's connected to the grid and putting stuff into it. A wind farm or a power station or a battery for instance, each of those will produce data on what they're generating at what level for pretty much every thirty minutes or so constantly twenty four to seven, all the time while you're awake, while you're sleeping, And all of that data from thousands of different assets combines into massive data sets that obviously cover years and years of historical data.

Todd and I and our colleagues on data investigations, well really, our colleagues on data investigations did the incredibly painstaking task of crunching more than I think it was like thirteen million market records into something intelligible that we could then use as the backbone of our reporting.

What we were really looking for was for when these wind farms said they were going to generate a certain amount, and we scraped to see all of the average estimates of what they said they would do and the average output of what they produced.

In other words, they wanted to find out whether the tip was true. Were wind farms overestimating how much power they produce and receiving extra curtailment money from the grid, and if they were, how much might UK consumers be overpaying? And what would that mean for the country's vision to more than triple its wind turbines by the end of

We're looking at this data, what we're looking at is data both on their generation but also on what's known as their physical notification. So that's what they tell the grid that they're expecting to forecast earlier in the day. And you can see in plain sight. Once you when I say in plain sight. Once you crunch the numbers in kind of you know, produce very nice looking charts afterwards, thanks to our colleagues, you can see the gap in between those numbers quite starkly.

What became glaringly obvious once you analyze that data was that about the third of the wind farms in our analysis were routinely overstating how much energy they said they were going to produce by at least ten percent, With a bunch you're overestimating by at least twenty percent. And there are outliers within that that were kind of up at the thirty forty to fifty percent mark in terms

How accurately should these operators be able to estimate that output on any given day.

So some of the wind farms in the analysis that we did, some of them got it remarkably accurate. There were a bunch that underestimated how much energy they would actually produce, but about a third overestimated by more than ten percent.

So you find this gap between how much energy certain wind farms say they'll produce and the reality. What is going through your heads as reporters and investigators. What could that mean for the industry for consumers.

Well, when you see that persistent gap and you speak to experts, and experts say, well, if you're bad at forecasting, you should be bad at forecasting both sides, right, So you should come out somewhere around zero, because you should be understating as much as you're overstating. So when you see such a positive tilt towards overstatement, it's just a red flag that something's going on there, especially when the

What's the response been like from wind farm operators themselves who are making these overestimates.

So yeah, it's important to stress that all the energy companies that we approach for comment said that they tried to make their forecasting as accurate as possible and hired third party contractors to help them do that. They said they take compliance with market rules and regulations very seriously, that they've never been contacted by off GEM or the government about any of their forecasts, and they also said that you know, sometimes it is just very hard to predict what the wind is going to do.

Off GEM is the Office of Gas and Electricity Markets energy regulator in the UK.

Off GEM, which has done a lot of work looking at retail costs household bill costs in the past couple of years. On this front, they said that they do look at the behavior of energy market participants to ensure they're following the rules all the time and that any operators that are found to be deliberately submitting misleading information can face substantial finds. But on our specific findings they didn't comment yet.

Former UK Energy Secretary Jacob Riis magg said he was shocked by the scale of overestimation in Bloomberg's findings and he called on off GEM to act urgently and investigate whether any of the wind firm operators were committing fraud. So what does this all mean for British consumers?

So the way that this works is quite a complex system of this money that the grid uses to pay them to turn off and the money that they pay gas plants to turn up. Because of these constraints. You know, this constraint bill is rising every year in this country. So the big picture is that over the next decade people are very worried that this annual toll is going to be into the billions of pounds. At the moment,

That's a lot of numbers. So to break it down, that eight hundred million pounds, that's the amount of extra money UK consumers paid because of grid constraints in twenty twenty two. That includes things like curtailment payments and money paid to gas fired power plants to produce extra electricity. The fifty million pounds is how much are Instigations Team calculated wind farms have been paid unnecessarily over the last five years because they've overestimated their power output.

But the key thing really is that when we're looking forward now, the UK government is looking to massively expand wind power even more than it has already. We're looking to triple more than triple the amount of wind capacity that we have on the system by the end of

Obviously it's hard to ascertain intent through this data, But what is your reporting show about why these best estimates are so inaccurate for some wind farm operators, why are they overestimating their output?

Well, it's difficult to say exactly the motivations for why wind farms are overstating quite as much as they are. You know, certainly we've spoken with traders who are at firms that are not overstating, and they were left sketching their heads. They were like, well, there's no reason for getting it so consistently wrong when they can get it so consistently right, and their wind farms are only a few miles away from these other wind farms that were

So, after doing all this reporting, reviewing, dizzying numbers of millions of records, crunching the data, what are you taking away?

What it really shows is that the advent and the real surge and renewable energy that a lot of countries, not just the UK, are having, means that they're going to be reckoning with a lot of unpredictability, a lot of questions over the integrity of their stay systems and

You know. What I'm left with from this reporting project is a worry that consumers are being saddled with lots of additional costs by energy firms who often are acting very much within the rules, very much within the law, but they are exploiting loopholes and badly drawn up market rules to maximize their revenue at the expense of fill pairs. There.

Gavin Todd, thank you so much for being on the show.

Thanks for having us.

Thank you very much.

This story was part of the power Plays series from Bloomberg's investigations team. You can find Gavin and Todd's piece and other stories from the series by searching for Powerplays on bloomberg dot com. Thanks for listening to the Big Take from Bloomberg News. I'm Sarah Holder. This episode was produced by David Fox. It was edited by Nicole Beemster, bor Alex Campbell, and Naomi Shaven. It was mixed by Alex Huguia. It was fact checked by Tiffany Choi. Our