United Kingdom

United Kingdom

The value of a roc

In the first year of Britain's Renewables Obligation (RO), electricity retailers in England and Wales met 60% of the mandate while in Scotland they met 55%. The shortfall in the number of Renewables Obligation Certificates (ROCs) held by the country's 23 electricity retailers -- eight of which dominate the market -- was due to the shortage of renewables generation. One ROC is created for every megawatt hour of green power generation eligible for certification.

The electricity suppliers are able to meet their obligations by demonstrating they hold the required number of ROCs for each obligation period. They acquire ROCs either from own generation or through trade with renewable energy generators. Alternatively, suppliers can pay £30 for every ROC not held to "buy out" of their obligation.

Money from the buy-out fund is recycled back to suppliers who have met, or partially met, their obligation. Suppliers factor the anticipated income from buy-out recycling into the prices they are willing to pay for ROCs. A summary of certificate trade at the end of the year, issued by energy regulator Ofgem, shows that with the recycling taking into account, ROC values were £45.94/MWh in England and Wales and £53.55/MWh in Scotland.

Two companies -- TXU (UK) and Maverick Energy -- failed to acquire any ROCs at all, having both entered into bankruptcy proceedings. Five other companies failed to comply correctly with their obligations, either by submitting a higher than allowed proportion of ROCs from co-fired biomass, or by missing the October 1 deadline. All five have agreed to make up their shortfall in payments to compliant suppliers. This is expected to add a further £0.10 to the England and Wales ROC value and £0.25 to Scotland's ROC value.

TXU administrators have agreed to pay between £0.35-£0.40 in the pound to suppliers who would have expected to receive recycled income from TXU, the total proceeds of that agreement to be distributed to suppliers in proportion to their compliance with their obligations. Taking these payments and Ofgem's figures into account, it is estimated the actual value of a ROC for the first year of the RO is £47.50 in England and Wales and £54 in Scotland.

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