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UK gas, wind power generation constraint costs dip in December

Highlights

North-south bottleneck eases

2020 payments up 44% for gas

Full year payments up 84% for wind

London — UK gas plant assets earned GBP56.1 million ($77 million) in constraint payments in December, down 30% on November's record GBP80.2 million payout, National Grid data showed.

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The balancing fees are paid by the electricity system operator to either constrain generation, or boost it in order to bring the system back into balance. The bulk of the fees are paid to gas plants for rebalancing, and wind plants for constraining output, but interconnectors and coal plants also benefit from the service.

November had been an exceptional month because of a 2 GW north-south transmission capacity reduction, exacerbating the bottleneck between wind-rich Scotland and loads centers in England.

With the reduction lifted, wind constraint payments in December of GBP20.12 million were down nearly 60% month on month, the data showed.

Full year 2020 constraint payments to gas plants of GBP642 million were up 44% year on year, while those to wind were up 84% to GBP240 million.

Total UK balancing costs (including the full array of services National Grid contracts to guarantee the lights stay on) amounted to GBP1.789 billion in 2020 compared with GBP1.198 billion for 2019 -- a 49% rise.

The costs translated into an average balancing charge on consumer bills of GBP4.12/MWh for December, compared with a year-ahead forecast for the month of GBP2.65/MWh.

The reasons for the increased costs last year are well-documented, and include: unpredictable, often very low power demand due to coronavirus lockdowns; the long-term loss of inertia due to coal plant closures; and the unexpected failure of Calon Energy, taking large CCGT gas plants out of the market ahead of the winter peak period.