Renewable Energy Foundation

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Notes on the Renewable Obligation

Generators subsidised by the Renewables Obligation (RO), are listed in the section entitled Large Scale Renewable Generators. The RO came into force in 2002 and is an obligation on UK electricity suppliers (not generators) to source an increasing proportion of their electricity from renewable sources or pay a penalty, referred to as the ‘buy-out price’. The legislation covering the RO has been revised a number of times and is complex. For a detailed explanation of its history and current status, the DECC and Ofgem websites provide useful documentation.

In summary, the generation of renewable electricity is authenticated by Renewables Obligation Certificates (ROC) issued by Ofgem. Until April 2009, one ROC was issued for each megawatt hour (MWh) of green electricity, but from April 2009 the different renewable technologies have been ‘banded’, with different technologies receiving different numbers of ROCs per MWh.

Banding of ROCs

The following table shows the latest bandings for England Scotland and Wales. For more details, and details of the bandings for renewable energy generators in Northern Ireland, see Ofgem’s guidance for generators

Table 1: Renewable Technologies and Renewable Obligation Certificates per MWh, 2013. Source: DECC Ofgem 

Technology pre 2013 2013/2014 2014/2015 2015/2016 2016/2017
Anaerobic Digestion 2 2 2 1.9 1.8
Co-firing high range New 0.7 0.9 0.9 0.9
Co-firing high range + CHP * New 1.2 1.4 1.4 1.4
Co-firing low range New 0.3 0.3 0.5 0.5
Co-firing low range + CHP* New 0.8 0.8 1 1
Co-firing mid range New 0.6 0.6 0.6 0.6
Co-firing mid range + CHP* New 1.1 1.1 1.1 1.1
Co-firing of Biomass 0.5 0 0 0 0
Co-firing of biomass with CHP 1 0 0 0 0
Co-firing of energy crops 1 0 0 0 0
Co-firing of energy crops with CHP 1.5 0 0 0 0
Co-firing of regular bioliquid 0.5 0.3 0.3 0.5 0.5
Co-firing of regular bioliquid + CHP* 1 0.8 0.8 1 1
Co-firing of relevant energy crops low range New 0.8 0.8 1 1
Co-firing of relevant energy crops low range + CHP New 1.3 1.3 1.5 1.5
Landfill Gas 0.25 0 0 0 0
Landfill Gas - closed sites New 0.2 0.2 0.2 0.2
Landfill Gas - heat recovery New 0.1 0.1 0.1 0.1
Sewage Gas 0.5 0.5 0.5 0.5 0.5
Conversion 1 1 1 1
Conversion + CHP 1.5 1.5 1.5 1.5
Dedicated biomass 1.5 1.5 1.5 1.5 1.4
Dedicated biomass with CHP 2 2 2 1.9 1.8
Dedicated energy crops 2 2 2 1.9 1.8
Dedicated energy crops with CHP 2
Energy from Waste with CHP 1 1 1 1 1
Advanced gasification/pyrolysis 2 2 2 1.9 1.8
Standard gasification/pyrolysis 1 2 2 1.9 1.8
Geopressure 1 1 1 1 1
Geothermal 2 2 2 1.9 1.8
Hydroelectric power - except Scotland 1 0.7 0.7 0.7 0.7
Hydroelectric power - Scotland 1 1 1 1 1
Enhanced tidal stream (Scotland only) 3
Tidal barrage (< 1GW DNC) 2 2 2 1.9 1.8
Tidal lagoon (<1gw dnc="" td=""> 2 2 2 1.9 1.8
Tidal Stream < 30MW 2 5 5 5 5
Enhanced wave (Scotland only) 5 5 5 5 5
Wave 2 2 2 2 2
Solar photovoltaic 2
Solar photovoltaic - building mounted New 1.7 1.6 1.5 1.4
Solar photovoltaic - ground mounted New 1.6 1.4 1.3 1.2
Offshore wind** 2 2 2 1.9 1.8
Onshore wind 1 0.9 0.9 0.9 0.9
Microgeneration (<=50kW DNC) 2 2 2 1.9 1.8

*  Conditional upon whether support is available via the RHI

** Note that offshore wind farms accredited prior to 1 April 2007 receive 1 ROC per MWh, between 1 April 2007 and 1 April 2010, 1.5 ROCs per MWh and after 1 April 2010 are awarded two ROCs per MWh.

Growth in the Renewables Obligation

The required proportion of all electricity supplied to consumers that must be met from renewable sources is determined by DECC, and up until March 2010, when banding was introduced, was a simple percentage of all electricity supplied. At that point the proportions were changed to an obligation to present a specified number of ROCs per 100 MWhs of electricity supplied, as is shown in the following table.

Table 2: Size of Renewable Obligation. Source: BEIS.

End of RO period RO as a Proportion of Electricity Supplied
31-Mar-03 3.0 %
31-Mar-04 4.3 %
31-Mar-05 4.9 %
31-Mar-06 5.5 %
31-Mar-07 6.7 %
31-Mar-08 7.9 %
31-Mar-09 9.1 %
31-Mar-10 9.7 %
31-Mar-11 11.1 ROCs per 100 MWh
31-Mar-12 12.4 ROCs per 100 MWh
31-Mar-13 15.8 ROCs per 100 MWh
31-Mar-14 20.6 ROCs per 100 MWh
31-Mar-15 24.4 ROCs per 100 MWh
31-Mar-16 29.0 ROCs per 100 MWh
31-Mar-17 34.8 ROCs per 100 MWh
31-Mar-18 40.9 ROCs per 100 MWh

To put these figures into context, the current level of electricity supplied per annum is approximately 310 TWh. Thus, the 2011 Obligation of 11.1 ROCs per 100 MWh of supplied electricity implies an Obligation of approximately 38.4 million ROCs.

If this requirement was satisfied by technologies receiving 2 ROCs per MWh then the obligation would be met by 19 TWh of renewable electricity or 6% of the whole. Conversely, if the Obligation was met from technologies receiving 0.25 ROCs per MWh, then the Obligation would be met by 154 TWh of renewable electricity or 50% of all electricity. In practice the Obligation is met by a mix of technologies in the different bands.

Value of Renewable Obligation Certificates

ROCs have an economic value made up of two parts. The first is the so-called ‘Buy-out’ price, which is effectively the saved penalty value of failing to meet the Obligation. This was set initially at £30 per MWh or per ROC, and has increased annually in line with the Retail Price Index (RPI). In addition, ROCs have a value representing the fact that the fines paid by any suppliers who fail to meet the obligation are distributed to other suppliers according to the ROCs produced. Thus, when a generator sells a ROC the price obtained reflects both the Buy-Out price, and the expected distribution of fines. The following table summarises this matter over the life of the scheme.

Period Buy Out Price per ROC Recycle Payment per ROC Total ROC value
2002/2003 £30.00 £15.94 £45.94
2003/2004 £30.51 £22.92 £53.43
2004/2005 £31.39 £13.66 £45.05
2005/2006 £32.33 £10.21 £42.54
2006/2007 £33.24 £16.04 £49.28
2007/2008 £34.30 £18.65 £52.95
2008/2009 £35.76 £18.61 £54.37
2009/2010 £37.19 £15.17 £52.36
2010/2011 £36.99 £14.35 £51.34
2011/2012 £38.69 £ 3.58 £42.27
2012/2013 £40.71 £ 3.67 £44.38
2013/2014 £42.02 £0.70 £42.72
2014/2015 £43.30 £0.35 £43.65
2015/2016 £44.33 £0.00 £44.33
2016/2017 £44.77

Each year Ofgem reports on the Buy-out price and the recycle payments for the previous RO period.