Because the wind providers have already sold that electricity in an energy auction. So the grid has to pay them for electricity, even if they can’t use it.

One of the big points in the article is that there’s a single energy market in the UK that doesn't consider location. So it’s possible for wind providers to sell energy from locations where it can’t be used. An obvious fix is to introduce multiple energy markets for different locations, so the price of electricity drops in areas where there’s excessive production, and not enough transfer capability.

This isn't a real economic loss. Claiming it is, is tantamount to saying that if you don't need to go to hospital while on vacation, you have wasted money on travel insurance.

How is this even close to insurance? When you buy insurance you buy protection from risk, that risk exists regardless of if a bad thing actually happens or not, and you’re still protected even if nothing happens. There’s no economic loss there because you’re getting the product you paid for (insurance coverage, and a substantial reduction of risk), you claiming on that insurance is irrelevant.

A better comparison would be going on holiday, pre-paying for £100,000 of medical treatment at a hospital, and then never going to hospital. Then there’s clearly an economic loss, you’ve paid £100,000 of your real cash, and got no nothing in return. You haven’t even got protection from risk, because the hospital isn’t gonna help you if your luggage goes missing, but travel insurance obviously will.

I don't think you understand how this stuff works in reality at the moment.

Perhaps the system could be changed to be more like how you imagine it should work, or would prefer that it would work.

But not understanding how it does work and jumping off from there on the discussion means that folks end up talking past each other, rather than actually communicating.

You didn't directly address anything I said in my post or explain why you think I am poorly informed..

I used to work for National Grid in the Miliband era; I worked, among other things, on theorizing a replacement to the 'circle diagram' for the (then thought to be) coming renewables regime.

>> Because the wind providers have already sold that electricity in an energy auction. So the grid has to pay them for electricity, even if they can’t use it.

> This isn't a real economic loss.

Perhaps I'm misinformed on what economic loss is. To me, paying for something and not getting it is a loss.

I go to movies, I buy popcorn, I spill popcorn. Movie theater says "tough noogies" to me that's a simple economic loss, and roughly the same. I paid for it, I didn't get it.

Worse still is paying for curtailment on both sides. From the article:

Consumers end up effectively paying three times for the power they’re getting: the original payment to the windfarm for the electricity, the payment to turn off, and then the payment to the alternative generator.

If this is true, and you're both paying a turbine operator for the power, and then again to not produce the power, well that's extra worse. That would be the initial economic loss (I paid for the thing and didn't get it) with an fee tacked on top.

I go to movies, I buy popcorn, I spill popcorn. Movie theater says "tough noogies" to me and doesn't replace the popcorn. They also charge me a fee for cleaning up the popcorn I spilled. That's worse from what I can tell.

Again maybe I don't understand what's going on here with respect to how precisely curtailment works. But it's hard to imagine that the situation

> So the grid has to pay them for electricity, even if they can’t use it.

is anything other than an economic loss.

Obviously my original example, "saying that if you don't need to go to hospital while on vacation, you have wasted money on travel insurance" perfectly fits your definition of economic loss.

I'm not sure I follow.

> Claiming it is, is tantamount to saying that if you don't need to go to hospital while on vacation, you have wasted money on travel insurance.

I see where you're going with the example. I don't think insurance is a good example though, because insurance is decidedly different, at least to my mind.

If you pay for insurance, you got insurance. You're not prepaying for medical treatment, you're paying a small fee to be made whole again if the trip goes sideways. If you paid for insurance and didn't need to use it, you still were insured and got the peace of mind that comes with knowing you either A) have a great time on your trip or B) don't pay for an entire trip that you don't get.

Paying for curtailment is directly paying for something that you directly don't get. No intermediaries, no risk model, no nothing.

If I'm failing to understand, well, OK then! Great! Please do inform me. You rightly stated that I called you misinformed without backing it up. If you're going to say that your original example is obviously correct, maybe try explaining it then?

Contract. They have to pay for the the bank for the wind turbines even if not used. They have to pay the land owners (or the bank for the land, and government taxes). You also need to pay various employees. Thus you don't open a wind farm without some form of contract.

On top of the above you want to make a profit.

Nothing to do with any of the above. Purely a function of how the energy markets in the UK work. There’s no contract providing you with a long term guarantee that the current situation will continue, and the grid doesn’t care if you go bust.

I don't know how the UK grid works. I know banks and investors won't put money into something if the rules don't give them confidence of a return on investment. Sure there are tech counter examples for investors, but banks are more careful.

Yeah, that confidence comes from the a wind farms business model, backed by a sound economic model. But there’s still risk, otherwise it’s not an investment.

Banks and investors lend/invest in things that are likely to succeed, and pay them back. But there’s no guarantee, and national grid sure as shit isn’t going to provide that guarantee, why would they take on all that risk?

The only guarantee provided to a wind farm by the grid, is that they’ll be able to participate in the market, and that the grid ensures they will take the power they sell in the market, or compensate them if they can’t (curtailment).

But there are no guarantees that there’s someone in the market to actually buy your power at the price you want to sell it. But as wind produces the cheapest electricity around, it’s a pretty reasonable bet that a wind farm can sell it energy for a profit.

Additionally the grid reserves the right to change how the markets work, within reasonable limits, and no doubt are required to take supplier and consumer issues into consideration. But if you don’t like the changes they make, your only recourse is to sue them, and prove they breached the contract. But there’s no guarantee you’ll win.

A smart bank/investor know all of these things, and will have a decent idea of changes that might impact the business model, and the likelihood of them occurring, and thus include those risks in their investment strategy. But absolutely nobody in this game goes in expecting a sure fire win, that’s just naive.

Consider reading the article.