Renewables Obligation Certificates
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The Renewables Obligation (RO) is a market support mechanism designed to encourage generation of electricity from eligible renewable sources in the United Kingdom. There are three related schemes for the three legal jurisdictions of the UK. In April 2002 the Renewables Obligation was introduced in
England and Wales England and Wales () is one of the Law of the United Kingdom#Legal jurisdictions, three legal jurisdictions of the United Kingdom. It covers the constituent countries England and Wales and was formed by the Laws in Wales Acts 1535 and 1542. Th ...
, and in
Scotland Scotland is a Countries of the United Kingdom, country that is part of the United Kingdom. It contains nearly one-third of the United Kingdom's land area, consisting of the northern part of the island of Great Britain and more than 790 adjac ...
as the Renewables Obligation (Scotland). The RO was introduced in
Northern Ireland Northern Ireland ( ; ) is a Countries of the United Kingdom, part of the United Kingdom in the north-east of the island of Ireland. It has been #Descriptions, variously described as a country, province or region. Northern Ireland shares Repub ...
in April 2005. In all cases, the RO replaced the Non-Fossil Fuel Obligation which operated from 1990. The RO placed an obligation on licensed electricity suppliers in the United Kingdom to source an increasing proportion of electricity from renewable sources, similar to a
renewable portfolio standard A renewable portfolio standard (RPS) is a regulation that requires the increased production of energy from renewable energy sources, such as wind, solar, biomass, and geothermal. Other common names for the same concept include Renewable Electric ...
. This figure was initially set at 3% for the period 2002/03, and in 2010/11 it was 11.1% (4.0% in Northern Ireland). By 2020 it was almost half of all electricity in England, Wales and Scotland, and nearly 20% in Northern Ireland. An extension of the scheme from 2027 to 2037 was declared on 1 April 2010 and is detailed in the
National Renewable Energy Action Plan A National Renewable Energy Action Plan (NREAP) is a detailed report submitted by countries outlining commitments and initiatives to develop renewable energy that all member states of the European Union were obliged to notify to the European Commi ...
. The RO closed to new generation between March 2015 and March 2017, with some grace periods. It was replaced by the
Contracts for Difference In finance, a contract for difference (CFD) is a financial agreement between two parties, commonly referred to as the "buyer" and the "seller." The contract stipulates that the buyer will pay the seller the difference between the current value o ...
scheme. Accredited generating stations will continue to receive 20 years of support, until March 2037.


Implementation

Suppliers meet their obligations by presenting Renewable Obligation Certificates (ROCs) to
Ofgem The Office of Gas and Electricity Markets (Ofgem) is the government regulator for the electricity and downstream natural gas markets in Great Britain. It was formed by the merger of the Office of Electricity Regulation (OFFER) and Office of G ...
. Where suppliers do not have sufficient ROCs to cover their obligation, a payment is made into the buy-out fund. The buy-out price suppliers pay is a fixed price per
MWh A kilowatt-hour ( unit symbol: kW⋅h or kW h; commonly written as kWh) is a non-SI unit of energy equal to 3.6 megajoules (MJ) in SI units, which is the energy delivered by one kilowatt of power for one hour. Kilowatt-hours are a commo ...
shortfall and is adjusted in line with the
Retail Prices Index In the United Kingdom, the Retail Prices Index or Retail Price Index (RPI) is a measure of inflation published monthly by the Office for National Statistics. It measures the change in the cost of a representative sample of retail goods and servic ...
each year. The proceeds of the buy-out fund are paid back to suppliers in proportion to how many ROCs they have presented. For example, if they were to submit 5% of the total number of ROCs submitted they would receive 5% of the total funds that defaulting supply companies pay into the buy-out fund. ROCs are intended to create a market, and be traded at market prices that differ from the official buy-out price. If there was an excess of renewable production beyond the supplier obligation, the price of ROCs would fall below the buy-out price. The price of ROCs could approach zero if renewable and non-renewable generation costs became similar, when there would be little or no subsidy of renewable generation. If there is less renewable production than the obligation, the price of ROCs would increase above the buy-out price, as purchasers anticipate later payments from the buy-out fund on each ROC. Obligation periods run for one year, beginning on 1 April and running to 31 March. Supply companies have until the 31 August following the period to submit sufficient ROCs to cover their obligation, or to submit sufficient payment to the buy-out fund to cover the shortfall. The cost of ROCs is effectively paid by electricity customers of supply companies that fail to present sufficient ROCs, whilst reducing the cost to customers of supply companies who submit large numbers of ROCs, assuming that all costs and savings are passed on to customers.


Percentages and prices by year

The percentage of electricity to be supplied by renewable electricity under the scheme generally increased each year. This is set separately for Great Britain (England and Wales plus Scotland) and for Northern Ireland. Sources:


Certificates

A ROC is the green
certificate Certificate may refer to: * Birth certificate * Marriage certificate * Death certificate * Gift certificate * Certificate of authenticity, a document or seal certifying the authenticity of something * Certificate of deposit, or CD, a financial p ...
issued for eligible
renewable electricity Renewable energy (also called green energy) is energy made from renewable natural resources that are replenished on a human timescale. The most widely used renewable energy types are solar energy, wind power, and hydropower. Bioenergy and ...
generated within the United Kingdom and supplied to customers in the United Kingdom by a licensed supplier. ROCs are issued by
Ofgem The Office of Gas and Electricity Markets (Ofgem) is the government regulator for the electricity and downstream natural gas markets in Great Britain. It was formed by the merger of the Office of Electricity Regulation (OFFER) and Office of G ...
to accredited renewable generators (or in the case of generating stations subject to a NFFO ( non-fossil fuels obligation), Scottish Renewables Obligation or Northern Ireland NFFO contract, to the nominated electricity supplier). The Scottish Renewables Obligation was superseded by the Renewables Obligation (Scotland) in 2002. The default is that one ROC is issued for each megawatt-hour (MWh) of eligible renewable output. Some technologies get more, some less. For instance,
offshore wind Offshore wind power or offshore wind energy is the Electricity generation, generation of electricity through wind farms in bodies of water, usually at sea. There are higher wind speeds offshore than on land, so offshore farms generate more elect ...
installations receive 2 ROCs per MWh;Collins, Peter
Renewables Obligation: Guidance for licensed electricity suppliers
page 2 ''
Office of Gas and Electricity Markets The Office of Gas and Electricity Markets (Ofgem) is the government regulator for the electricity and downstream natural gas markets in Great Britain. It was formed by the merger of the Office of Electricity Regulation (OFFER) and Office of G ...
(Ofgem)'', 22 April 2010. Retrieved: 29 September 2010.
onshore wind installations receive 0.9 ROCs per MWh and
sewage gas Biogas is a gaseous renewable energy source produced from raw materials such as agricultural waste, manure, municipal waste, plant material, sewage, green waste, wastewater, and food waste. Biogas is produced by anaerobic digestion with anaerob ...
-fired plants receive half a ROC per MWh. ROCs are issued into the ROC Register and so are electronic certificates. Normally, a renewable generator will transfer the related ROCs through Ofgem's electronic registry when it sells power to an electricity supplier.


Legislation

The
Utilities Act 2000 The Utilities Act 2000 (c. 27) is an Act of the Parliament of the United Kingdom that deals with the gas and electrical markets in the UK. It mainly modified the Gas Act 1986, the Gas Act 1995 and Electricity Act 1989. One of the greatest chan ...
gives the Secretary of State the power to require electricity suppliers to supply a certain proportion of their total sales in the United Kingdom from electricity generated from
renewable A renewable resource (also known as a flow resource) is a natural resource which will replenish to replace the portion depleted by usage and consumption, either through natural reproduction or other recurring processes in a finite amount of ti ...
sources. A Renewables Obligation Order is issued annually detailing the precise level of the obligation for the coming year-long period of obligation and the level of the buy-out price. The Renewables Obligation (England and Wales) was introduced by the
Department of Trade and Industry Department of Trade and Industry may refer to: Current * Department of Trade and Industry (Isle of Man) * Department of Trade and Industry (Philippines) * Department of Trade, Industry and Competition (South Africa) Former * Department of Trade ...
, the Renewables Obligation (Scotland) was introduced by the
Scottish Executive The Scottish Government (, ) is the executive arm of the devolved government of Scotland. It was formed in 1999 as the Scottish Executive following the 1997 referendum on Scottish devolution, and is headquartered at St Andrew's House in t ...
s and the Northern Ireland Renewables Obligation was introduced by the
Department of Enterprise Trade and Investment The Department for the Economy (DfE, ) is a devolved Northern Ireland government department in the Northern Ireland Executive. The minister with overall responsibility for the department is the Minister for the Economy. DfE was renamed in 2 ...
(DETINI). The Orders were subject to review in 2005/06 and new Orders came into effect on 1 April 2006. The relevant pieces of legislation for the period April 2006 – March 2007 are: *The Renewables Obligation Order 2006 (Statutory Instrument (SI) 2006 No. 1004) *The Renewables Obligation (Scotland) Order 2006 (SI 2006 No. 173), and *The Renewables Obligation Order (Northern Ireland) 2006 (SI 2006 No. 56). All pieces of legislation are published on the National Archives legislation site.


Ofgem's role

Ofgem The Office of Gas and Electricity Markets (Ofgem) is the government regulator for the electricity and downstream natural gas markets in Great Britain. It was formed by the merger of the Office of Electricity Regulation (OFFER) and Office of G ...
is the
Office of Gas and Electricity Markets The Office of Gas and Electricity Markets (Ofgem) is the government regulator for the electricity and downstream natural gas markets in Great Britain. It was formed by the merger of the Office of Electricity Regulation (OFFER) and Office of G ...
in Great Britain. The Orders detail Ofgem's powers and functions to administer the Renewables Obligation. These functions include: *Accrediting generating stations as being capable of generating electricity from eligible renewable sources *Issuing ROCs and revoking these as necessary *Establishing and maintaining a Register of ROCs *Monitoring compliance with the requirements of the Orders *Calculating annually the buy-out price *Receiving buy-out payments and redistributing the buy-out fund *Receiving late payments and redistributing the late payment fund, and *Publishing an annual report on the operation of and compliance with the requirements of the Orders. Ofgem also administers the Northern Ireland Renewables Obligation (NIRO) on behalf of the
Northern Ireland Authority for Energy Regulation Northern may refer to the following: Geography * North, a point in direction * Northern Europe, the northern part or region of Europe * Northern Highland, a region of Wisconsin, United States * Northern Province, Sri Lanka * Northern Range, a ra ...
(NIAER).


Types of energy eligible

The following sources of electricity are eligible for ROCs (although the scheme is closed to new entrants): *
Biogas Biogas is a gaseous renewable energy source produced from raw materials such as agricultural waste, manure, municipal waste, plant material, sewage, green waste, Wastewater treatment, wastewater, and food waste. Biogas is produced by anaerobic ...
from
anaerobic digestion Anaerobic digestion is a sequence of processes by which microorganisms break down biodegradable material in the absence of oxygen. The process is used for industrial or domestic purposes to Waste management, manage waste or to produce fuels. Mu ...
*
Biomass Biomass is a term used in several contexts: in the context of ecology it means living organisms, and in the context of bioenergy it means matter from recently living (but now dead) organisms. In the latter context, there are variations in how ...
*
Combined Heat and Power (CHP) Cogeneration or combined heat and power (CHP) is the use of a heat engine or power station to generate electricity and useful heat at the same time. Cogeneration is a more efficient use of fuel or heat, because otherwise- wasted heat from elec ...
*
Hydroelectricity Hydroelectricity, or hydroelectric power, is Electricity generation, electricity generated from hydropower (water power). Hydropower supplies 15% of the world's electricity, almost 4,210 TWh in 2023, which is more than all other Renewable energ ...
*
Tidal power Tidal power or tidal energy is harnessed by converting energy from tides into useful forms of power, mainly electricity using various methods. Although not yet widely used, tidal energy has the potential for future electricity generation. T ...
*
Wind power Wind power is the use of wind energy to generate useful work. Historically, wind power was used by sails, windmills and windpumps, but today it is mostly used to generate electricity. This article deals only with wind power for electricity ge ...
*
Photovoltaic cells A solar cell, also known as a photovoltaic cell (PV cell), is an electronic device that converts the energy of light directly into electricity by means of the photovoltaic effect.
*
Landfill gas Landfill gas is a mix of different gases created by the action of microorganisms within a landfill as they decompose organic waste, including for example, food waste and paper waste. Landfill gas is approximately forty to sixty percent methane, ...
*
Sewage gas Biogas is a gaseous renewable energy source produced from raw materials such as agricultural waste, manure, municipal waste, plant material, sewage, green waste, wastewater, and food waste. Biogas is produced by anaerobic digestion with anaerob ...
*
Wave power Wave power is the capture of energy of wind waves to do useful mechanical work, work – for example, electricity generation, desalination, or pumping water. A machine that exploits wave power (physics), power is a wave energy converter (WEC). W ...
Co-firing of biomass is also eligible. Not all technologies which are eligible are actually supported, due to cost. Some renewable sources of electricity are not eligible for ROCs (e.g. larger hydroelectric schemes which were in operation before April 2002).


Banding

The Renewables Obligation represents the UK Government's main policy measure for stimulating the growth of electricity generation from renewable sources.DTI. (2007). ‘Reform of the Renewables Obligation’, May 2007 The Government envisages that 30% of electricity demand will need to be generated by renewable sources in order for the UK to meet a legally binding EU target of obtaining 15% of energy from renewable sources by 2020. The Renewables Obligation is a market-based mechanism designed to incentivise the generation of electricity from renewable energy sources over more traditional alternatives at a reasonable cost. When it was first introduced in 2002, each form of renewable energy technology received the same level of support, namely one ROC/MWh of electricity generated. This was a conscious decision as the Government was keen to promote a market-led approach, emphasising competition between technologies to minimise cost, and did not want to distort the market by appearing to place the importance of certain technologies above others. As a result, whilst being ostensibly technology-neutral, the Renewables Obligation in its original form in fact favoured the deployment of the more established, near-market technologies such as
landfill gas Landfill gas is a mix of different gases created by the action of microorganisms within a landfill as they decompose organic waste, including for example, food waste and paper waste. Landfill gas is approximately forty to sixty percent methane, ...
and onshore wind, those which were most economically efficient, over less well developed technologies that were further from commercial viability. A review of the performance of the Renewables Obligation was announced in 2003. Modelling of future deployment scenarios indicated that targets would not be met with current levels of support due to constraints on the availability and deployment of the most established technologies. A significant contribution would therefore be required from less mature technologies which lacked sufficient incentive to develop into feasible alternatives under the original scheme. The Government announced its intention to reform the Renewables Obligation in 2006. Banding was introduced in 2009 to provide differing levels of support to groups of technologies depending upon their relative maturity, development cost and associated risk. Whilst increasing the incentive for technologies in the early stages of development this also allowed the level of support for well established technologies to be reduced to avoid over-subsidisation. In reforming the Renewables Obligation in this way, and scheduling regular future reviews, the Government recognised that the market would not deliver the mix of renewable energy generation required to meet the targets if the incentives remained technology-neutral. It was therefore necessary for the Government to perform a continuing strategic role and retain the capability to intervene if necessary. The introduction of banding allowed the Government to steer industry towards investment in less well developed forms of renewable energy to enable them to contribute to meeting the long-term targets, rather than concentrating investment in technologies that are economically favourable in the short-term. The Government has reviewed the banding levels for appropriate incentives for the period 2013–2017. These bands include a reduction in the tariff for onshore wind to 0.9 ROCs/MWh and an increase for small
wave In physics, mathematics, engineering, and related fields, a wave is a propagating dynamic disturbance (change from List of types of equilibrium, equilibrium) of one or more quantities. ''Periodic waves'' oscillate repeatedly about an equilibrium ...
and tidal stream projects, under 30 MW, to 5 ROCs/MWh.


Government review

The obligation was reviewed by government following a consultation period that finished in September 2007. The document at the centre of the consultation set out an amended form of the RO which will see different technologies earn different numbers of ROCs. This has not yet been adopted as policy. On 22 January 2007, Ofgem called for the Renewables Obligation to be replaced, claiming that the scheme is a 'very costly way' of supporting renewable electricity generation. In particular they are concerned that electricity customers pay for renewables projects even if they are not built due to problems obtaining
planning permission Planning permission or building permit refers to the approval needed for construction or expansion (including significant renovation), and sometimes for demolition, in some jurisdictions. House building permits, for example, are subject to buil ...
, and the failure of the Renewables Obligation to link financial support for renewables to either the electricity price or the price of renewables in the
European Union Emissions Trading Scheme The European Union Emissions Trading System (EU ETS) is a carbon emission trading scheme (or ''cap and trade'' scheme) that began in 2005 and is intended to lower greenhouse gas emissions in the EU. Cap and trade schemes limit emissions of spec ...
. The British Wind Energy Association, whose members are major beneficiaries of the existing scheme, claims that Ofgem is partly responsible for the costs because it has failed to prioritise work on the National Grid which would allow more renewable capacity to be connected. They also stressed the need to maintain stability in the marketplace to maintain the confidence of investors. The concerns of both bodies seem to be shared by the
Renewable Energy Association The Association for Renewable Energy and Clean Technology, previously known as Renewable Energy Association (REA), is a renewable energy and clean technology trade association in the UK encompassing all of renewables industry in the United K ...
. The Scottish Wind Assessment Project has criticised the scheme for rewarding reductions in renewable electricity output: two electricity suppliers,
Scottish and Southern Energy SSE plc (formerly Scottish and Southern Energy plc) is a multinational energy company headquartered in Perth, Scotland. It is listed on the London Stock Exchange, and is a constituent of the FTSE 100 Index. SSE operates in the United Kingdom a ...
and Npower, down-rated several large hydro-power stations in order to qualify for Renewables Obligation Certificates.


2010s reforms and scheme closure

The UK Government proposed wide-ranging reforms to the UK electricity market which saw
feed-in tariff A feed-in tariff (FIT, FiT, standard offer contract,Couture, T., Cory, K., Kreycik, C., Williams, E., (2010)Policymaker's Guide to Feed-in Tariff Policy Design National Renewable Energy Laboratory, U.S. Dept. of Energy advanced renewable tariff, ...
s with
contracts for difference In finance, a contract for difference (CFD) is a financial agreement between two parties, commonly referred to as the "buyer" and the "seller." The contract stipulates that the buyer will pay the seller the difference between the current value o ...
(CfD) replace the Renewables Obligation as the main renewable generation support mechanism. Unlike ROCs, CfDs will also be available to generators of nuclear electricity. Other than with respect to large scale (>5MW) solar photovoltaic power projects and onshore wind power projects, the Renewables Obligation remained open to new generation until 31 March 2017, allowing new renewable generation that comes online between 2014 (when it was anticipated the CfDs would start) and 2017 to choose between CfDs and ROCs. After that date, the government intended to close the Renewables Obligation to new generation while continuing existing ROCs, meaning that levels and length of support for existing participants in the Renewables Obligation would be maintained. However, the UK government subsequently announced that it would bring forward the deadline for Renewables Obligation accreditation for large scale (>5MW) solar photovoltaic power projects, to 1 April 2015. The government further announced on 18 June 2015 that it intended to close the Renewables Obligation to new onshore wind power projects on 1 April 2016, bringing the deadline forward by one year. In addition to the introduction of
feed-in tariffs A feed-in tariff (FIT, FiT, standard offer contract,Couture, T., Cory, K., Kreycik, C., Williams, E., (2010)Policymaker's Guide to Feed-in Tariff Policy Design National Renewable Energy Laboratory, U.S. Dept. of Energy advanced renewable tariff, ...
, the UK Government's proposed electricity market reform included two further initiatives to encourage the
decarbonisation Climate change mitigation (or decarbonisation) is action to limit the greenhouse gases in the atmosphere that cause climate change. Climate change mitigation actions include conserving energy and replacing fossil fuels with clean energy sour ...
of
electricity generation Electricity generation is the process of generating electric power from sources of primary energy. For electric utility, utilities in the electric power industry, it is the stage prior to its Electricity delivery, delivery (Electric power transm ...
: a Carbon Price Floor and an Emissions Performance Standard.


Renewables Obligation closure dates and grace periods

The RO schemes closed to new generation as follows. * England and Wales and Scotland: ** All, except solar PV and onshore wind: 31 March 2017 ** Onshore wind: 12 May 2016 ** Solar PV ≤ 5 MW: 31 March 2016 ** Solar PV > 5 MW: 31 March 2015 * Northern Ireland: ** All, except onshore wind: 31 March 2017 ** Onshore wind ≤ 5 MW: 30 June 2016 ** Onshore wind > 5 MW: 31 March 2016 A series of grace periods were set out, where generating stations could be accredited after the closure date, subject to meeting the following criteria. The first three applied until 31 March 2018, with the latter three until 30 September 2018. * Connection delays caused by grid and/or radar. * Where signed investment contracts were terminated under specific circumstances. * Where offshore wind or ACT projects could demonstrate evidence of substantial financial decisions and investments made before 9 November 2014. * Projects allocated a place within the 400 MW dedicated biomass cap. * Scottish offshore wind using test and demonstration or floating wind turbines. * Where biomass with CHP projects could demonstrate evidence of substantial financial decisions and investments made before 9 November 2014.


See also

*
Electricity billing in the UK In the United Kingdom, an electricity supplier is a retailer of electricity. For each supply point the supplier has to pay the various costs of transmission, distribution, meter operation, data collection, tax etc. The supplier then adds in ener ...
*
Future Energy Future Energy is a former accreditation scheme for green electricity in the United Kingdom, designed to support and stimulate electricity generation from renewable energy sources. The scheme was launched in 1999 and was operated by the Energy Saving ...
(former green electricity accreditation scheme) * Green electricity * Green tags * Non-Fossil Fuel Obligation *
Contracts for Difference (UK electricity market support) Contracts for Difference (CfD) are the main market support mechanism for low carbon electricity generation in the UK. The scheme replaced the Renewables Obligation which closed to new generation in March 2017. It is administered by the Low Carbo ...
* Renewable Energy Certificates (United States) – a similar mechanism in the US *
United Kingdom Climate Change Programme The United Kingdom's Climate Change Programme was launched in November 2000 by the British government in response to its commitment agreed at the 1992 United Nations Conference on Environment and Development (UNCED). The 2000 programme was upd ...


References


External links


Calculating Renewable Obligation Certificates (ROCs) – banding
Department of Energy & Climate Change, April 2013 * 8 January 2007, ''New Builder:'
BWEA warns on UK renewables policy as Germany leads the way
* 9 October 2006, ''ePolitix.com:'' * 9 August 2006, ''
Guardian Unlimited ''The Guardian'' is a British daily newspaper. It was founded in Manchester in 1821 as ''The Manchester Guardian'' and changed its name in 1959, followed by a move to London. Along with its sister paper, ''The Guardian Weekly'', ''The Guardi ...
:'
Tickell, O: Treasury takes £150m out of renewable energy fund
{{Energy in the United Kingdom, govreg Renewable energy in the United Kingdom Environment of the United Kingdom Waste legislation in the United Kingdom