Curtailment of Renewable Generation Legal Frameworks

1. Introduction

Curtailment of renewable generation means reducing or stopping electricity production from a renewable-energy project even though wind, sunlight, or another renewable resource is available. Curtailment may occur because of transmission congestion, limited grid capacity, low demand, balancing problems, or electricity-system security requirements.

As countries increase renewable generation, legal frameworks are needed to decide when curtailment is permitted, who can order it, how generators are selected, whether compensation is payable, and who bears the cost.

2. Legal Basis for Curtailment

Curtailment is normally governed by a combination of:

electricity legislation;

grid codes;

network-access rules;

renewable-energy regulations;

licences of system operators; and

power-purchase or grid-connection agreements.

A major international example is the European Union's Regulation (EU) 2019/943 on the internal market for electricity. It establishes detailed rules for redispatching and curtailment.

Article 13 requires redispatching to be based on objective, transparent and non-discriminatory criteria. Market-based redispatch is generally preferred, while non-market-based redispatch is permitted only under specified conditions.

3. Priority for Renewable Electricity

Modern legal frameworks generally seek to prevent unnecessary curtailment of renewable electricity.

Article 13 of Regulation 2019/943 requires transmission and distribution operators to take appropriate measures to minimise downward redispatching of renewable electricity. Network operators must aim to transmit renewable electricity with the minimum possible level of redispatching.

However, renewable generation does not have an unlimited legal right to remain connected and generate at all times. System security remains an important consideration.

For example, curtailment may be necessary where continuing generation would create a serious risk to the stability or security of the electricity system.

4. Market-Based and Non-Market-Based Curtailment

There are two important approaches.

Market-Based Curtailment

Under market-based redispatch, generators and other flexible market participants can submit offers to change their electricity production or consumption. The system operator selects appropriate resources according to market rules.

This approach attempts to make curtailment economically efficient.

Non-Market-Based Curtailment

Non-market-based redispatch may be used where market-based alternatives are unavailable or insufficient.

EU law places stronger legal conditions on this approach. Downward redispatch of renewable generation should generally be used only where alternatives are unavailable or where alternatives would create significantly disproportionate costs or serious network-security risks. The decision must be properly and transparently justified.

5. Compensation for Curtailment

A major issue is financial compensation.

When a renewable generator is ordered to reduce output through qualifying non-market-based redispatch, Regulation 2019/943 generally provides for financial compensation. The calculation can take account of additional operating costs and the net revenue that the facility would otherwise have earned.

This principle protects renewable generators from carrying the entire economic burden of a network constraint created by the wider electricity system.

However, compensation is not unlimited. The legal position can differ where a generator has accepted a non-firm grid connection or other contractual allocation of curtailment risk.

6. Grid Investment and Curtailment

Legal frameworks increasingly recognise that persistent curtailment may indicate a need for network investment.

Transmission and distribution operators may need to consider:

transmission-line expansion;

stronger substations;

network reinforcement;

interconnectors;

battery storage;

demand response; and

digital grid-management systems.

Regulation 2019/943 requires network operators to take measures to minimise renewable downward redispatch and recognises digitalisation and flexibility services as tools for reducing future curtailment.

7. Transparency and Regulatory Oversight

A proper legal framework requires transparency.

System operators should record and report:

the amount of electricity curtailed;

reasons for curtailment;

location of the constraint;

duration of the event;

redispatch costs;

compensation paid; and

measures taken to prevent future curtailment.

Regulators can use this information to determine whether curtailment is genuinely necessary or whether better network planning and investment are required.

8. Relevant Case Laws

TenneT TSO GmbH and TenneT TSO BV v ACER, Case T-482/21

The General Court decided T-482/21 on 25 September 2024. The case concerned ACER's methodology for allocating the costs of redispatching and countertrading in the European Core electricity region.

The judgment demonstrates that congestion-management decisions can have substantial financial effects and that regulatory cost-allocation methodologies must comply with the applicable legal requirements.

TransnetBW GmbH v ACER, Case T-476/21

In T-476/21, the General Court examined another dispute concerning the methodology for sharing redispatching and countertrading costs between transmission-system operators.

The case is relevant because electricity congestion and curtailment increasingly involve cross-border electricity flows, making clear rules for cost allocation essential.

Charanne and Construction Investments v Spain

The Charanne v Spain arbitration concerned changes to Spain's renewable-energy support framework. Although it was not directly a curtailment case, it is relevant to renewable-generation law because it considered the relationship between regulatory changes, renewable investment expectations and protection of investors.

The case demonstrates that renewable projects operate within changing regulatory environments, while governments retain regulatory powers over electricity markets.

9. Conclusion

The legal framework for curtailment of renewable generation must balance renewable-energy utilisation, grid security, economic efficiency and investment protection.

A strong framework should provide clear rules on when curtailment is permitted, how generators are selected, when compensation is payable, how congestion costs are allocated, and what network operators must do to reduce future curtailment.

The EU framework under Regulation 2019/943 provides an important model because it combines non-discrimination, market-based redispatch, compensation, network planning and regulatory transparency. Cases such as TenneT v ACER and TransnetBW v ACER further show the importance of lawful and transparent regulation of congestion-related costs.