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Rising value of green power -- Green credits auction

The value of renewables power continues to rise in Britain. The latest auction of green certificates reveals keen bidding among electricity retailers (known as suppliers in Britain) anxious to fulfil their renewables obligations. The price paid in the second auction of renewables obligation certificates (ROCs) from Scottish renewable plants averages £47.46 per ROC, or £0.047/kWh. Each ROC is issued for one megawatt hour of power generated from a renewable energy plant. The value of the green certificate is added to the market price at which the electricity is sold.

The green certificate price is up from an average £47.13/ROC paid in the previous auction in October. The latest auction was conducted online in January by the Scottish subsidiary of Britain's Non-Fossil Purchasing Agency. Three bidders were successful out of 15 suppliers who registered to bid for the total of 64,337 ROCs.

In the first year of Britain's renewables obligation, electricity retailers are required to buy ROCs equivalent to 3% of their power, rising to 10% in 2010. The ROCs auctioned were issued for electricity generated in July, August and September, of which 55% was from Scottish wind farms. The auction's winning retailers will have the option of banking the ROCs against future years, but they will most likely need them to offset their obligations in 2002/03 due to the shortage of renewables electricity.

Retailers who fail to meet their 3% renewables obligation for the year are required to pay a fine of £30 for each megawatt hour of power they have failed to acquire a ROC for. The fines -- usually referred to as the buy-out price -- are pooled and recycled to retailers who have complied with the Renewables Obligation. For this reason, retailers factor their likely share of fine revenues into their bids. As a result, the market price of wind has risen above the price of buying out of the Renewables Obligation.

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