Renewables Obligation Certificates
Renewables Obligation Certificates
This page is intended to provide a general introduction to Green Energy Certificates, and signposts readers to more detailed sources of information. The main focus here is on the Renewables Obligation (RO) and Certificates(ROCs). Other Certificates explained on this page are Climate Change Levy Exemption Certificates (LEC) and Renewable Energy Guarantee of Origin (REGO)
The Renewable Energy Obligation (RO) and Renewable Obligation Certificates (ROCs) Background The Renewables Obligation (RO) is the main UK Government mechanism for supporting renewable energy. It is an obligation placed on all licensed electricity suppliers to source a proportion of all electricity supplied to customers in the UK from eligible renewable sources. These sources include both dedicated biomass generation and biomass co-firing. The proportion of renewable derived electricity that UK power suppliers have to supply grows every year. The RO started in 2002 with a required percentage of 3%, which will rise to 15% by 2015. The obligation level is 9.1% for 2008/09. How ROCs work ROCs increase the profitability of renewable energy generation as the certificates have an additional value over and above the price of electricity itself. Certificates can be sold to energy suppliers to enable them to demonstrate compliance with the RO. Renewable electricity generators of all sizes receive 1 Renewable Obligation Certificate (ROC) for every 1 MWh of renewable electricity generated subject to accreditation. Reforms proposed to the RO mean that from April 2009, renewable energy technology will be banded, with some forms of energy generation receiving 2 ROCs per 1MWh. The price of a ROC is subject to the market, but generators could currently expect to receive approximately £40 - £50 per ROC. Any electricity exported to the grid will also attract a price. See the section on selling ROCS for more information. Penalties for Energy Suppliers that do not meet the Obligation Energy suppliers can either present enough certificates to Ofgem to cover the required percentage of their output, by producing green energy themselves or by buying ROCs, or they must pay a ‘buyout’ price for any shortfall (£35.76 per MWh in 2008-9). The buyout price is set each year by Ofgem. The Role of Ofgem Ofgem administers the ROC scheme. Its main functions are to: · Provide accreditation to generating stations to prove that they are an eligible renewable source · Issue ROCs · Establish and maintain a register of ROCs · Monitor compliance with the Order and other relevant legislation Accreditation and Claiming & Selling ROCS In order to claim ROCs for electricity generated from renewable sources, your generating station will need to be registered with Ofgem through a process called accreditation. Firstly it will involve registering your details on the Renewables and CHP Register available at https://www.renewablesandchp.ofgem.gov.uk/ This Register allows generators to apply for accreditation, receive certificates (ROCs, Renewable and CHP LECs and REGOs) and submit annual declarations. The register also allows generators, agents and suppliers to transfer certificates. More information is available at: http://www.ofgem.gov.uk/Sustainability/Environment/RCHPreg/Pages/RCHPreg.aspx To register and gain accreditation, follow the instructions contained in the Ofgem Renewables and CHP Register User Guide. This is a step by step guide to registering as an energy generator with Ofgem, and about how to gain accreditation for your generating station and how to manage your account. Note that you can choose to register and manage your account yourself, or, once you have registered, you can appoint an agent who can help you with the process of accreditation, and manage your ROCs on your behalf. In order to successfully get accreditation for your generating station, you will need to install an Ofgem approved meter. More information about this can be found on the Ofgem website. ROCs will be issued either monthly or annually to yourself or your agent, depending on how you have decided to manage them.
Options for Selling ROCs and Electricity Finding the right option for your situation will take some time and research. There are different agreements that suit various sizes of generators. The easy option: Small generators Some licensed electricity suppliers with Green Tariffs will buy and sell your electricity and ROCS on your behalf. Some tariffs will pay a standard price of electricity generated, regardless of whether it is exported to the Grid or used on-site. Generally these Tariffs include an agreement for the Energy Company to receive your ROCS. See: Ecotricity: www.ecotricity.co.uk Green Energy: www.greenenergy.uk.com/Default.aspx Good Energy: www.good-energy.co.uk Exporting electricity to the Grid Larger generators – Sell your electricity but keep your ROCS Some electricity suppliers will pay a price per unit of electricity that is generated and exported to the grid. (1 unit = 1 KWh of electricity) An export meter will have to be fitted, which can be expensive. You will only receive payment for electricity exported to the Grid, so this option would suit a generator that is producing significantly more electricity than can be used on-site. This option allows the owner of a generating station to receive and sell their ROCs. Some energy companies will allow you to sell your ROCS to them at a set price. In addition to the companies listed above, see also: NPower Juice: www.npower.com EDF Energy: www.edfenergy.com Scottish and Southern Energy is a company that has considerable experience dealing with small renewable energy generators http://www.scottish-southern.co.uk/SSEInternet/ Note: There are other energy companies offering Green Tariffs A useful website for further information about this is Better Generation: Selling ROCs Selling your own Rocs can be time consuming, though financially it could be beneficial. ROCs can be auctioned at www.e-roc.co.uk. In the most recent auction on 9th October 2008, over 100,000 ROCs were purchased. The average price was £51.29. Note however that to auction ROCS, there is a 50p per ROC charge, and the minimum fee is £50.00. Agents can bundle up the small numbers of ROCS awarded to many different generators and sell in bulk. Although you will not receive as much money per ROC, it is probably the most efficient option for household generators. For further information, accreditation application forms and FAQs, see the Ofgem Renewable Obligation Pages: http://www.ofgem.gov.uk/Sustainability/Environmnt/RenewablObl/Pages/RenewablObl.aspx See also:
All proceeds from buyout payments are distributed to suppliers in proportion to the number of ROCs they present. This means that the penalty costs are redistributed to competitors who do manage to meet the targets, providing a good incentive to meet the target.
Future Developments – ROC ‘banding’ proposals in the 2007 Energy White Paper The 2007 Energy White Paper contained proposals to further encourage renewable energy generation. The RO system is to be reformed to introduce a new banding system for the issuing of ROCs, depending on the method used to generate electricity. The Energy Bill will provide the enabling powers needed, while the subsequent Renewables Obligation Order 2009 will lay out the details of the new banding system. It is intended to provide more financial support to new and useful or underdeveloped renewable energy technologies and less support to commercially established technologies. Effectively, companies would receive double subsidies to entice them to get involved in the newer or more costly technologies. · More expensive, less established technologies like gasification will be issued with more than one ROC per MWh of energy they produce. Reforms effective from 1st April 2009 · Existing renewables projects including those that submit planning applications before the new system is introduced will keep their existing ROC bandings under a "grandfathering" system until at least 2027. An issue is arising with regards to claiming double ROCs and state funded capital grants as both constitute State Aid. A single business may not claim more than 40% of the capital value of a business so it is possible that a business will not be able to claim both double ROCS and a capital grant. New Guidelines proposed Band Technologies ROCS per MWh Established Co-firing of a non Energy Crop biomass Sewage gas Landfill gas 0.25 ROCS per MWh Reference CHP from waste Onshore wind Hydro electric Co-firing of energy crops 1 ROC per MWH Post Demonstration Dedicated regular biomass Offshore wind 1.5 ROCS per MWh Emerging Technology Advanced Thermal Conversion Dedicated biomass with CHP Solar, Photovoltaics, Geothermal, Wave, tidal stream Energy crops (with or without CHP) Anaerobic Digestion (biogas) 2 ROCS per MWh Government consultation paper is available at: http://www.berr.gov.uk/consultations/page46710.html Further information on ROCS from the Department for Business Enterprise and Regulatory Reform (BERR): http://www.berr.gov.uk/energy/sources/renewables/policy/renewables-obligation/page15630.html
Climate Change Levy Exemption Certificates (LEC) The Climate Change Levy is an energy tax that adds approximately 15% to UK business energy bills. Electricity Suppliers need to source LECs so they can exempt business consumers from Climate Change Levy - which is £4.56 on 1 MWh of electricity as of 1st April 2008. 1 LEC can be claimed for each 1 MWh of renewable energy generated. Generators can sell their LECS to utilities or other third parties, at a price agreed between them, although they are not worth much.
Renewable Energy Guarantee of Origin (REGO) The purpose of REGOs is as a demonstration that renewable electricity has been produced. REGOs do not have a monetary value in the same way as ROCs and LECs. Fuel mix disclosure requirements placed on suppliers mean that suppliers are likely to want to purchase renewable electricity from generators with the associated REGO as they are required to present REGOs to meet their fuel mix disclosure obligations. 1 REGO is issued per 1 kWh of renewable electricity generated. The REGO scheme is administered by Ofgem. Any generator wishing to be issued with REGOs will need to have their installation accredited by Ofgem. Once your installation is accredited Ofgem will create an account for you in the REGO Register, www.regoregister.ofgem.gov.uk . If you are generating energy solely for you own use, you do not require REGOs, they just make renewable energy more attractive to suppliers who may be buying your renewable electricity.
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