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, and in Scotland as the Renewables Obligation (Scotland). The RO was introduced in Northern Ireland 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. 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. In 2026, the RO subsidised more than 30% of the UK's electricity generation. The RO closed to new generation between March 2015 and March 2017, with some grace periods. It was replaced by the Contracts for Difference 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. 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 shortfall and is adjusted in line with the Retail Prices Index (RPI) 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 issued for eligible renewable electricity generated within the United Kingdom and supplied to customers in the United Kingdom by a licensed supplier. ROCs are issued by Ofgem 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 installations receive 2 ROCs per MWh; onshore wind installations receive 0.9 ROCs per MWh and sewage gas-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 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 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, the Renewables Obligation (Scotland) was introduced by the Scottish Executives and the Northern Ireland Renewables Obligation was introduced by the Department of Enterprise Trade and Investment (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 is the Office of Gas and Electricity Markets in Great Britain. The Orders detail Ofgem's powers and functions to administer the Renewables Obligation. These functions include:
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