What are constraint payments?
Constraint payments are made to a generator whose output is moved by the System Operator (SO) from its optimum market position. “Constraints” and their associated payments can apply to any generator, and are not unique to wind, as generation can be constrained up, or down, for reasons of transmission network limitations and reserve requirements.
To enable the efficient and secure operation of the electricity system, generation is dispatched at certain levels to prevent equipment overloading, excessive voltages or system instability1. All generators above a certain size threshold, including wind farms, respond to dispatch instructions from the Market Operator (MO) and System Operator (SO) – EirGrid and SONI. Generators are normally dispatched on a strict economic merit order basis where lowest cost generators are given priority. EU and Government energy policy also requires that generation from renewable energy sources is assigned priority grid access so the System Operators ensure that all of the electricity available from renewable sources is utilised before fossil fuelled sources are despatched. This is subject to exception in the case where system security may be compromised. Occasionally, due to critical system services or transmission line overloads, the output of some lower cost generators may be constrained down and higher cost generators run in their place. According to circumstances the generator that is constrained may or may not be compensated for the loss of market access for their output.
The terms “constraint” and “curtailment” have a particular meaning in the Single Energy Market in Ireland. Constraints (either up or down) refer to a change to any generator’s output from the planned “market schedule” due to transmission network limitations or operating reserve requirements. For example, generators may be requested to produce spare capacity (reserve) which can be quickly brought online if needed to ensure security of the system. Curtailment on the other hand is (so far) unique to wind and arises when wind output exceeds what the system can accommodate securely. The SOs must ensure that the power system is safe and secure at all times. Too much wind energy can cause instability in the system and has to be curtailed or when there is a lack of capacity in the transmission circuits it is ‘constrained’ to the same effect. At such times the SO may have to instruct the wind-farms to generate less power than they could, in which case constraint payments are given to wind generators with “firm” network access to recompense their loss, and are included in our energy costs (Fig. 2). Other similar variable renewable generation such as utility scale solar PV may also be subject to curtailment in future.