As speakers and delegates debated ways to improve the bankability of ROCs, Temperton argued against the prevailing view that favours increasing the RO beyond the present target of 10.4% of electricity from wind power in 2010. This would be in effect asking the energy consumer for more money even though that money does come beyond 2010-11, he said.
"There is enough money in the RO as it stands to build the 2010 target. But it is obvious that there is a disconnect between taking those funds which are sufficient and converting them into a framework in which the private sector can invest," said Temperton. "I don't think extending the RO is the answer because if there is enough money in the system to achieve the objective, then we ought to be able to structure the deal to make that money be deployed to meet that objective." His proposal, he explained, ensures that long term price becomes a structural element of the RO system.
Under Temperton's "Vintage Roc 'n' Roll" structure, the first "vintage" would include all projects that begin operating up to 2011. From 2011 and for the rest of the period of the obligation, which runs up to 2027, suppliers would have to source 10.4% of their electricity from the pre-2011 vintage. This would increase the incentive to meet the 2010 target by 2010, he said.
Explaining the advantages, Temperton said that vintage ROCs would allow developers to negotiate the long-term bankable power purchase agreements (PPAs) with suppliers that they need to secure financing for their projects.
"As you turn the corner of 2011 you know what demand for ROCs is going to be of that vintage over the next 15 to 16 years -- it is going to be 10.4%. You also know what the supply is going to be," he said. "ROCs would still be traded as they are today, but the price at which ROCs are going to be traded is relatively narrow and well understood. It means that the price you get for those ROCs is a stable function of the market."
Stressing the simplicity of the proposal, Temperton explained that nothing else would need to be done for now, beyond the government declaring a policy of vintages. To increase the proportion of renewables beyond 2010, the government could, in say 2006 or 2007, declare the terms of a new vintage covering a period from 2011. Any changes to the rules would be made in that vintage, he said. "Those rules are grandfathered over 15 years, so you would have certainty that they wouldn't change."
Rolling vintages also give an exit from the RO when subsidies are no longer required, he added. "No target has to be announced beyond 2011 and the financial commitment of the government does not have to be extended beyond 2027."
Temperton warned the conference that it is incumbent on the industry to treat the money available under the RO carefully and efficiently and at the same time be seen to be delivering the targets. "There is tremendous political and financial backing now available to the industry. Don't waste it," he said.