Investigation into Moray Offshore Windfarm (East) Limited's compliance with the TCLC

17th April 2025

Ofgem is investigating the compliance of Moray Offshore Windfarm (East) Ltd (the owner and operator of Moray East Offshore Windfarm) with the requirements of condition 20A of the Electricity Generation Standard Licence Conditions (known as the Transmission Constraint Licence Condition, or "TCLC").

A transmission constraint is defined in the TCLC as any limit on the ability of the national electricity transmission system, or any part of it, to transmit the power supplied onto the system to the location where the demand for that power is situated. In order to manage transmission constraints, National Energy System Operator ("NESO") routinely uses the balancing mechanism ("BM") to increase and decrease the amount of electricity produced by different generators.

Typically, when managing a transmission constraint, NESO will only have a limited number of alternatives available to it. This creates a risk that generators could exploit their position by charging NESO excessive prices to reduce their output. The TCLC prohibits them from doing so.

Since it began operating in the BM in September 2021, Moray East Offshore Windfarm has been regularly instructed by NESO to reduce its generation to manage transmission constraints. Its bid prices since then appear expensive relative to the expected marginal cost of reducing generation for this generator. Our investigation will assess whether these bid prices were excessive during periods of constraint.

The opening of this investigation does not imply that we have made any findings about non-compliance by Moray Offshore Windfarm (East) Ltd.

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Moray East, one of Britain's largest wind farms, is under investigation for allegedly overcharging customers to switch off its turbines. So-called ‘constraint payments' are made when wind farms are told to switch off because the transmission grid cannot transport the excess power produced. Such payments, which are added to consumer bills, are meant to compensate solely for lost income. However, Ofgem is investigating claims that Spanish owner Ocean Winds over-claimed millions of pounds on behalf of Moray East, after allegations of such were made by charity the Renewable Energy Foundation (REF). It passed on its findings to the regulator, findings which included calculations Moray East was paid £100m in the two years to September 2023.

Renewable Energy Foundation
In 2023, REF highlighted this issue and followed up by complaining to Ofgem in October 2023 saying that in the 2 years to 30 September 2023 ‘We estimate that Moray East was paid approximately £100 million by the Electricity System Operator (ESO) for these actions, making it by a long margin the most expensive site used to manage constraints, comprising 60% of the total constraint costs to the consumer for all generator types for the period." We showed that Moray East was charging £66 per MWh to reduce output even though no subsidy was being forgone.

In March 2024 we published a comprehensive report on what we believe is routine overcharging for constraints by wind farms and we estimated that this exceeded £100 million in 2023. We provided Ofgem with the data that underpinned our calculations in May 2024. This was covered by the Telegraph.

Following recent falls in bid prices used for constraint payments, we recalculated the potential over-charging by the 26 ‘unsubsidised' wind farms which included Moray East for the period of two and a half years that it deferred taking up its CfD. Our estimate of the total overcharged by this set of wind farms came to £340 million.

While Ofgem is to be commended for starting an investigation into Moray East offshore windfarm, it is disturbing that it has apparently taken nearly two years for an investigation into this single wind farm to commence. Our data suggests that almost all of the 123 wind farms which have received constraint payments have been overcharging the consumer and that Ofgem needs to develop a more serious strategy for reclaiming these payments and returning them to the consumer very much more promptly.

Renewable Energy Foundation
In 2023, REF highlighted this issue and followed up by complaining to Ofgem in October 2023 saying that in the 2 years to 30 September 2023 ‘We estimate that Moray East was paid approximately £100 million by the Electricity System Operator (ESO) for these actions, making it by a long margin the most expensive site used to manage constraints, comprising 60% of the total constraint costs to the consumer for all generator types for the period." We showed that Moray East was charging £66 per MWh to reduce output even though no subsidy was being forgone.

In March 2024 we published a comprehensive report on what we believe is routine overcharging for constraints by wind farms and we estimated that this exceeded £100 million in 2023. We provided Ofgem with the data that underpinned our calculations in May 2024. This was covered by the Telegraph.

Following recent falls in bid prices used for constraint payments, we recalculated the potential over-charging by the 26 ‘unsubsidised' wind farms which included Moray East for the period of two and a half years that it deferred taking up its CfD. Our estimate of the total overcharged by this set of wind farms came to £340 million.

While Ofgem is to be commended for starting an investigation into Moray East offshore windfarm, it is disturbing that it has apparently taken nearly two years for an investigation into this single wind farm to commence. Our data suggests that almost all of the 123 wind farms which have received constraint payments have been overcharging the consumer and that Ofgem needs to develop a more serious strategy for reclaiming these payments and returning them to the consumer very much more promptly.
https://www.ref.org.uk/ref-blog/389-ofgem-opens-investigation-into-moray-east-constraint-payments