Proving compliance
The Renewables Obligation scheme is regulated by the Office of Gas and Electricity Markets (OFGEM).
Generators of electricity from eligible renewable sources are awarded Renewable Obligations Certificates (ROCs) for every megawatt hour they generate. These certificates can be sold to energy suppliers along with the electricity they buy or can be traded independently.
Every year, suppliers must demonstrate compliance by submitting sufficient ROCs to OFGEM to meet their target – or make a buy-out payment for any shortfall.
Driving Investment
Combined with the buy out payments (which are re-circulated), the extra revenue from ROC sales effectively doubles the income for renewable generators. Together with annual increases in the RO target, this drives investment in new renewable capacity.
The cost of the Renewables Obligation is ultimately borne by energy users, as it is recouped by suppliers via higher energy prices.
Banding
In response to the Government’s Energy Bill (January 2008), the Renewables Obligation Order (2009) introduced the concept of ROC banding. This entitles emerging technologies (such as wave, tidal and solar PV) to additional ROCs, improving the business case for the extra investment necessary. Similarly, it reduces the ROC allocation for established technologies (such as landfill gas) that require less incentivisation.
| Band |
Technologies |
Support ROCs/MWh |
| Established 1 |
Landfill gas |
0.25 |
| Established 2 |
Sewage gas, co-firing on non-energy crop (regular) biomass |
0.5 |
| Reference |
Onshore wind; hydro-electric; co-firing of energy crops; EfW with combined heat and power; geopressure; other not specified |
1.0 |
| Post-Demonstration |
Offshore wind*; dedicated regular biomass |
1.5 |
| Emerging |
Wave; tidal stream; advanced conversion technologies (anaerobic digestion; gasification and pyrolysis); dedicated biomass burning energy crops (with or without CHP); dedicated regular biomass with CHP; solar photovoltaic; geothermal, Tidal lagoons, tidal barrages (<1GW) |
2.0 |
Source: BERR Renewables Obligation Consultation
*It was proposed in the 2009 budget to raise the allocation for Offshore Wind to 2 ROCs for 09/10 and 1.75 for 10/11
These changes are consistent with our Policy Frameworks for Renewables report (2006), which concluded that the financial incentive to use renewable sources of energy must be changed in order to fully deliver the maximum environmental and economic benefits to the UK.
For more information please refer to The Renewables Obligation
(BIS site).