Speaker 1: Over the last few decades, thousands of wind turbines have
Speaker 1: popped up in remote regions of the UK.
Speaker 2: There's been a huge surge in renewable generation in the UK.
Speaker 1: That's my colleague Todd Gillespie. He's done a lot of
Speaker 1: reporting on energy markets for Bloomberg and he says that
Speaker 1: in particular, wind power in the UK has exploded.
Speaker 2: That's largely driven by very deliberate policy measures that were
Speaker 2: taken by successive governments and largely to take advantage of
Speaker 2: the vast resources that we have in the North Sea
Speaker 2: and in Scotland.
Speaker 1: And Todd says this ballooning of the country's wind power
Speaker 1: capacity it's directly related to subsidies from the UK government.
Speaker 2: These projects take a long time to build, right, So
Speaker 2: what the government did is said right will basically guarantee
Speaker 2: you a revenue price per megal hour of power that
Speaker 2: you produce way out in the future. Once these projects
Speaker 2: are built, once they're up and running, you can have
Speaker 2: a fifteen year contract from the moment they start going
Speaker 2: forwards and you can basically be sure that you're going
Speaker 2: to get your return on investment.
Speaker 1: And at first glance, these investments seem to have paid off.
Speaker 1: Just sixteen years ago, a little more than one percent
Speaker 1: of the country's electricity came from wind power.
Speaker 2: But last year in December, we produced over forty percent
Speaker 2: of our power from wind, which when you talk to
Speaker 2: people on the street, they don't quite realize quite how
Speaker 2: clean our energy system is compared to a lot of
Speaker 2: other countries.
Speaker 1: But beneath those massive strides in renewable energy infrastructure, something
Speaker 1: is lurking. Today on the show How a team of
Speaker 1: investigative reporters at Bloomberg uncovered a problem within the UK's
Speaker 1: green power industry that's costing consumers millions of pounds per
Speaker 1: year and what it means for the country's green energy future.
Speaker 1: I'm Sarah Holder. This is big take from Bloomberg News.
Speaker 1: Before we explain what our colleagues uncovered, it's helpful to
Speaker 1: know a little bit about how wind farms work.
Speaker 3: Most of the wind farms in the UK are located
Speaker 3: in Scotland and off the Scottish coast. That's where most
Speaker 3: of the windows and there's lots more space there build them.
Speaker 1: That's Gavin Finch. He's a member of Bloomberg's investigations team
Speaker 1: and he and Todd work together on this project.
Speaker 3: But most of the consumption is in England, so that
Speaker 3: energy needs to travel south to where the people are.
Speaker 1: To move power across the UK, the country relies on
Speaker 1: a network of transmission.
Speaker 2: Lines, huge cables that come along the backbone of the country,
Speaker 2: and then they get taken down into smaller and smaller
Speaker 2: cables through distribution networks and then into really local networks
Speaker 2: and into people's homes, into factories, into businesses, and into
Speaker 2: your street lights and everything outside your house as well.
Speaker 1: That network of transmission lines is what's known as the grid.
Speaker 3: The UK grid is very outdated. It was built decades ago,
Speaker 3: kind of designed around big gas powered power stations.
Speaker 1: One of the challenges is that you need more grid,
Speaker 1: more cables and pylons to handle the rise in power
Speaker 1: generation that countries are experiencing. With power plants that burn
Speaker 1: fossil fuels like coal or gas, humans are in control
Speaker 1: of how much electricity is being created, but that can
Speaker 1: be trickier with renewable sources like wind. No one can
Speaker 1: control the weather, and when the wind blows harder, the
Speaker 1: wind turbines spin faster and generate more electricity.
Speaker 3: So on super windy days there's just no way that
Speaker 3: all that energy can travel from Scotland to England without
Speaker 3: overloading those transmission cables.
Speaker 1: The solution to this problem relies on projections. Every day,
Speaker 1: wind farms look at wind forecasts and have to tell
Speaker 1: grid operators how much power they expect to produce throughout
Speaker 1: the day. If conditions are calm and grid operators see
Speaker 1: there won't be enough wind power to meet demand, they
Speaker 1: bok to local gas fired plants to turn on and
Speaker 1: fill the gap. And if it ever looks like their
Speaker 1: turbines are going to produce more power than the transmission
Speaker 1: lines can handle, grid operators will tell the wind farms
Speaker 1: to turn off and they'll pay the wind farms for
Speaker 1: the energy they're no longer able to sell.
Speaker 3: So wind farms are paid lots and lots of money
Speaker 3: just to switch off, because otherwise everything would blow up.
Speaker 1: That policy is known as curtailment and it's the heart
Speaker 1: of Gavin and Todd's investigation.
Speaker 3: Crucially, that compensation is based on what these wind farms
Speaker 3: forecast they would have produced, so there's an incentive there
Speaker 3: to overstate your output because then you were going to
Speaker 3: be paid more money in compensation.
Speaker 1: For Gavin Todd and the team. Their curiosity about these
Speaker 1: payments started with a tip.
Speaker 3: So we had a source who told us that we
Speaker 3: should look at wind farms because he'd noticed that they
Speaker 3: were routinely overstating how much energy they said they were
Speaker 3: going to produce. You know, easy guy who's just very
Speaker 3: on top of the data, and that was just an
Speaker 3: anomally he spotted.
Speaker 1: So they took that tip and went hunting for data.
Speaker 2: Anything that's connected to the grid and putting stuff into it.
Speaker 2: A wind farm or a power station or a battery
Speaker 2: for instance, each of those will produce data on what
Speaker 2: they're generating at what level for pretty much every thirty
Speaker 2: minutes or so constantly twenty four to seven, all the
Speaker 2: time while you're awake, while you're sleeping, And all of
Speaker 2: that data from thousands of different assets combines into massive
Speaker 2: data sets that obviously cover years and years of historical data.
Speaker 3: Todd and I and our colleagues on data investigations, well really,
Speaker 3: our colleagues on data investigations did the incredibly painstaking task
Speaker 3: of crunching more than I think it was like thirteen
Speaker 3: million market records into something intelligible that we could then
Speaker 3: use as the backbone of our reporting.
Speaker 2: What we were really looking for was for when these
Speaker 2: wind farms said they were going to generate a certain amount,
Speaker 2: and we scraped to see all of the average estimates
Speaker 2: of what they said they would do and the average
Speaker 2: output of what they produced.
Speaker 1: In other words, they wanted to find out whether the
Speaker 1: tip was true. Were wind farms overestimating how much power
Speaker 1: they produce and receiving extra curtailment money from the grid,
Speaker 1: and if they were, how much might UK consumers be overpaying?
Speaker 1: And what would that mean for the country's vision to
Speaker 1: more than triple its wind turbines by the end of
Speaker 1: the decade. What they found out after the break when
Speaker 1: we left off, Todd Gavin and their team had just
Speaker 1: spent months compiling tens of millions of wind farm records
Speaker 1: and they had created a data set that could answer
Speaker 1: their question, had certain UK wind farms been overestimating their
Speaker 1: power output when.
Speaker 2: We're looking at this data, what we're looking at is
Speaker 2: data both on their generation but also on what's known
Speaker 2: as their physical notification. So that's what they tell the
Speaker 2: grid that they're expecting to forecast earlier in the day.
Speaker 2: And you can see in plain sight. Once you when
Speaker 2: I say in plain sight. Once you crunch the numbers
Speaker 2: in kind of you know, produce very nice looking charts afterwards,
Speaker 2: thanks to our colleagues, you can see the gap in
Speaker 2: between those numbers quite starkly.
Speaker 3: What became glaringly obvious once you analyze that data was
Speaker 3: that about the third of the wind farms in our
Speaker 3: analysis were routinely overstating how much energy they said they
Speaker 3: were going to produce by at least ten percent, With
Speaker 3: a bunch you're overestimating by at least twenty percent. And
Speaker 3: there are outliers within that that were kind of up
Speaker 3: at the thirty forty to fifty percent mark in terms
Speaker 3: of overstatement. Now this is controversial because you know they're
Speaker 3: paid compensation based on those forecast generation.
Speaker 1: How accurately should these operators be able to estimate that
Speaker 1: output on any given day.
Speaker 3: So some of the wind farms in the analysis that
Speaker 3: we did, some of them got it remarkably accurate. There
Speaker 3: were a bunch that underestimated how much energy they would
Speaker 3: actually produce, but about a third overestimated by more than
Speaker 3: ten percent.
Speaker 1: So you find this gap between how much energy certain
Speaker 1: wind farms say they'll produce and the reality. What is
Speaker 1: going through your heads as reporters and investigators. What could
Speaker 1: that mean for the industry for consumers.
Speaker 3: Well, when you see that persistent gap and you speak
Speaker 3: to experts, and experts say, well, if you're bad at forecasting,
Speaker 3: you should be bad at forecasting both sides, right, So
Speaker 3: you should come out somewhere around zero, because you should
Speaker 3: be understating as much as you're overstating. So when you
Speaker 3: see such a positive tilt towards overstatement, it's just a
Speaker 3: red flag that something's going on there, especially when the
Speaker 3: wind farm it's in their favor to overstate. If you
Speaker 3: are overstating how much energy you're going to produce on
Speaker 3: any given day, then if you are switched off, you're
Speaker 3: going to be being paid for energy that you never
Speaker 3: had any intention of producing in the first place.
Speaker 1: What's the response been like from wind farm operators themselves
Speaker 1: who are making these overestimates.
Speaker 3: So yeah, it's important to stress that all the energy
Speaker 3: companies that we approach for comment said that they tried
Speaker 3: to make their forecasting as accurate as possible and hired
Speaker 3: third party contractors to help them do that. They said
Speaker 3: they take compliance with market rules and regulations very seriously,
Speaker 3: that they've never been contacted by off GEM or the
Speaker 3: government about any of their forecasts, and they also said
Speaker 3: that you know, sometimes it is just very hard to
Speaker 3: predict what the wind is going to do.
Speaker 1: Off GEM is the Office of Gas and Electricity Markets
Speaker 1: energy regulator in the UK.
Speaker 2: Off GEM, which has done a lot of work looking
Speaker 2: at retail costs household bill costs in the past couple
Speaker 2: of years. On this front, they said that they do
Speaker 2: look at the behavior of energy market participants to ensure
Speaker 2: they're following the rules all the time and that any
Speaker 2: operators that are found to be deliberately submitting misleading information
Speaker 2: can face substantial finds. But on our specific findings they
Speaker 2: didn't comment yet.
Speaker 1: Former UK Energy Secretary Jacob Riis magg said he was
Speaker 1: shocked by the scale of overestimation in Bloomberg's findings and
Speaker 1: he called on off GEM to act urgently and investigate
Speaker 1: whether any of the wind firm operators were committing fraud.
Speaker 1: So what does this all mean for British consumers?
Speaker 2: So the way that this works is quite a complex
Speaker 2: system of this money that the grid uses to pay
Speaker 2: them to turn off and the money that they pay
Speaker 2: gas plants to turn up. Because of these constraints. You know,
Speaker 2: this constraint bill is rising every year in this country.
Speaker 2: So the big picture is that over the next decade
Speaker 2: people are very worried that this annual toll is going
Speaker 2: to be into the billions of pounds. At the moment,
Speaker 2: it's about eight hundred or so million pounds. In the
Speaker 2: worst recent year in twenty twenty two, UK bill payers
Speaker 2: paid about eight hundred million pounds extra because of the
Speaker 2: costs associated with constraints. Generally speaking, so switching off these
Speaker 2: wind turbines and paying gas plants to switch up. This
Speaker 2: level of exaggeration we've calculated over the past five years
Speaker 2: added over fifty million pounds to their bills, so it's
Speaker 2: it's not insignificant addition to that.
Speaker 1: That's a lot of numbers. So to break it down,
Speaker 1: that eight hundred million pounds, that's the amount of extra
Speaker 1: money UK consumers paid because of grid constraints in twenty
Speaker 1: twenty two. That includes things like curtailment payments and money
Speaker 1: paid to gas fired power plants to produce extra electricity.
Speaker 1: The fifty million pounds is how much are Instigations Team
Speaker 1: calculated wind farms have been paid unnecessarily over the last
Speaker 1: five years because they've overestimated their power output.
Speaker 2: But the key thing really is that when we're looking
Speaker 2: forward now, the UK government is looking to massively expand
Speaker 2: wind power even more than it has already. We're looking
Speaker 2: to triple more than triple the amount of wind capacity
Speaker 2: that we have on the system by the end of
Speaker 2: this decade. So even these small variances and these relatively
Speaker 2: small estimation biases that you might call them, will start
Speaker 2: having a bigger and bigger impact as the next few
Speaker 2: years go on, unless the kinds of behavior that we've
Speaker 2: seen and these kinds of patterns are reduced significantly.
Speaker 1: Obviously it's hard to ascertain intent through this data, But
Speaker 1: what is your reporting show about why these best estimates
Speaker 1: are so inaccurate for some wind farm operators, why are
Speaker 1: they overestimating their output?
Speaker 3: Well, it's difficult to say exactly the motivations for why
Speaker 3: wind farms are overstating quite as much as they are.
Speaker 3: You know, certainly we've spoken with traders who are at
Speaker 3: firms that are not overstating, and they were left sketching
Speaker 3: their heads. They were like, well, there's no reason for
Speaker 3: getting it so consistently wrong when they can get it
Speaker 3: so consistently right, and their wind farms are only a
Speaker 3: few miles away from these other wind farms that were
Speaker 3: getting it so wrong. And so these traders that we
Speaker 3: spoke to, you know, they said, well, really, the only
Speaker 3: reason for that is that it's financially beneficial to some
Speaker 3: wind farms to behave in this way.
Speaker 1: So, after doing all this reporting, reviewing, dizzying numbers of
Speaker 1: millions of records, crunching the data, what are you taking away?
Speaker 2: What it really shows is that the advent and the
Speaker 2: real surge and renewable energy that a lot of countries,
Speaker 2: not just the UK, are having, means that they're going
Speaker 2: to be reckoning with a lot of unpredictability, a lot
Speaker 2: of questions over the integrity of their stay systems and
Speaker 2: what a really sort of distributed energy market means. And
Speaker 2: there needs to be you know, the regulators and policymakers
Speaker 2: need to make sure that the market design and the
Speaker 2: enforcement of energy market regulation need to make sure that
Speaker 2: that's up to scratch and the energy transition is positive.
Speaker 2: As it is for the Fire against Climate change, it
Speaker 2: also poses serious challenges.
Speaker 3: You know. What I'm left with from this reporting project
Speaker 3: is a worry that consumers are being saddled with lots
Speaker 3: of additional costs by energy firms who often are acting
Speaker 3: very much within the rules, very much within the law,
Speaker 3: but they are exploiting loopholes and badly drawn up market
Speaker 3: rules to maximize their revenue at the expense of fill pairs. There.
Speaker 3: We actually spoke to one trader who put it very
Speaker 3: blunt that he basically said, look, what do you think
Speaker 3: happens when you incentivize a group of people to make
Speaker 3: as much money as they possibly can, saying just as
Speaker 3: side of the law. Well, they're going to make as
Speaker 3: much money as they possibly can, staying just the side
Speaker 3: of the law.
Speaker 1: Gavin Todd, thank you so much for being on the show.
Speaker 2: Thanks for having us.
Speaker 3: Thank you very much.
Speaker 1: This story was part of the power Plays series from
Speaker 1: Bloomberg's investigations team. You can find Gavin and Todd's piece
Speaker 1: and other stories from the series by searching for Powerplays
Speaker 1: on bloomberg dot com. Thanks for listening to the Big
Speaker 1: Take from Bloomberg News. I'm Sarah Holder. This episode was
Speaker 1: produced by David Fox. It was edited by Nicole Beemster,
Speaker 1: bor Alex Campbell, and Naomi Shaven. It was mixed by
Speaker 1: Alex Huguia. It was fact checked by Tiffany Choi. Our
Speaker 1: senior producers are Naomi Shaven and jillda Di Carly. We
Speaker 1: get editorial direction from Elizabeth Ponso. Nicole Beemster bor is
Speaker 1: our ex executive producer. Sage Bauman is our head of podcasts.
Speaker 1: Special thanks to Gavin Finch and Todd Gillespie for their reporting.
Speaker 1: Thanks for tuning in. We'll be back tomorrow