The Renewables Obligation (RO) is the current main mechanism for supporting large scale generation of renewable electricity. Since its introduction in 2002, it has succeeded in more than tripling the level of renewable electricity in the UK from 1.8% to 6.64%1 and is currently worth around £1.42 billion/year in support to the renewable electricity industry.
Since its introduction, the RO has been subject to various reforms and improvements. The most significant being in April 2009, with the introduction of banding, where different technologies receive different levels of support, providing a greater incentive to those that are further from the market with potential to deploy on a large scale.
In April 2010, further changes included the RO being extended from its current end date of 2027 to 2037 for new projects, in order to provide greater long-term certainty for investors, and an increase in support for offshore wind projects meeting certain criteria.
The RO works by placing an obligation on licensed electricity suppliers to source a specified and annually increasing proportion of their electricity sales from renewable sources, or pay a penalty.
The obligation in England & Wales for 2010/11 is 0.111 ROCs per MWh i.e. approximately 11% renewable electricity3.
The RO is administered by Ofgem who issue Renewables Obligation Certificates (ROCs) to renewable electricity generators. Previously, 1 ROC was issued for each megawatt hour (MWh) of eligible generation, regardless of technology. As of 1 April 2009, the reforms introduced mean that new generators joining the RO now receive different numbers of ROCs, depending on their costs and potential for large-scale deployment. For example, onshore wind continues to receive 1 ROC/MWh, offshore wind currently receives 2 ROCs/MWh, and energy crops 2 ROCs/MWh
Renewables Obligation (Amendment) Order 2010
The Renewables Obligation (Amendment) Order 2010 has been approved by both Houses of Parliament and came into force on 1 April 2010. The Order introduces changes to the RO including extending it to 2037, providing additional support for offshore wind projects and making provisions for the transition of certain categories of generator to the Feed-In Tariffs scheme.
A consolidated version of the order
Renewables Obligation Banding Review Process
Following the introduction of banding in April 2009, it was agreed that the bands for all technologies would be reviewed at regular intervals. The attached document sets out the process for the 2010 - 13 banding review and the principles to be followed for future early reviews.
Review of support for offshore wind
As part of the Budget 2009, the Chancellor announced that we would be reviewing the level of RO support for offshore wind.
The decision to launch an early review was based on evidence provided to DECC, including a report produced by Ernst & Young on our behalf. We published this report on 27 April 2009 and it is available below:
Following the conclusion of the review process, including a consultation on proposals to award a higher level of support to offshore wind projects meeting certain conditions, we announced in the Government Response that all offshore wind projects granted full accreditation between 1 April 2010 and 31 March 2014 would receive 2 ROCs/MWh.
Further information on this announcement is set out in the Q&A document below:
Calculating the Obligation
Article 12(4) of the Renewables Obligation Order 2009 requires that the Secretary of State must publish, by the 1st October preceding an obligation period, the number of renewables obligation certificates that a designated electricity supplier is required to produce in respect of each megawatt hour of electricity that it supplies to customers in England and Wales during that period in order to discharge its renewables obligation for that period.
The Department can today confirm that the Obligation level for supplies to customers in England and Wales for the period running from 1st April 2010 to 31st March 2011 has been set by using Calculation B and will be 0.111 ROCs per MWh (megawatt hour).
Details of how the Obligation level was calculated can be found in the document below:
Review of the removal of the requirement for ‘sale and buyback’ agreements: 18 January 2010.
In April 2007 an administrative simplification was made to the Renewables Obligation (RO) legislation which removed the requirement for generators who consume their own electricity to enter into ‘sale and buyback’ agreements in order to claim Renewables Obligation Certificates (ROCs). Ministers agreed to conduct a review of the removal of the requirement once the legislation had been in force for 2 years. The results of the review are set out in the document below.
1 Department of Energy & Climate Change, June 2010 Energy Trends
2 Ofgem - http://www.ofgem.gov.uk/Sustainability/Environment/RenewablObl/Pages/RenewablObl.aspx
3 Published by Secretary of State - Department of Energy & Climate Change