After deducting the average power price, the value of the levy exemption certificates (LECs), and embedded benefits, the ROC is valued in the region of £42 per certificate, she says. Allowing up to £30 for the "buy out" cap, the buy out recycle for those deals would appear to be valued at between £12-£15. She points out, however, that £64.40/MWh is at the top end of the market -- and most bilateral trades since the auction have closed at prices below that level.
Santokie explains that deals are currently being struck between generators and buyers for stand-alone ROCs as well as for the more usual "bundled" transactions -- with the ROC, ROC recycle, LEC, embedded benefits and physical power wrapped up together in one package. Although electricity market regulator Ofgem and the government originally envisaged ROCs being sold separately from the physical power, generators are often being offered lower power prices for their output without the green benefit attached.
This is widely known to be a particular problem in Scotland where different electricity trading rules make it difficult for electricity suppliers operating in England and Wales to contract for power from Scottish projects. This leaves renewable generators in Scotland no choice but to sell their ROCS and power to a Scottish electricity company. The problem is expected to be eased in 2004, however, when the electricity trading arrangements in the rest of Britain are introduced north of the border.
An early trade of ROCs without electricity was clinched last month with the sale by Cinergy of 5000 ROCs, representing 1 MWh each, to Powergen, for delivery by April. This is about the amount of power produced by a 10 MW wind farm over ten weeks. Neither party would comment on the price of the ROCs involved, though a Dow Jones wire report quoted £45 (EUR 72.8) per ROC.
Since it started structuring trades in ROCs, Natsource has found that the majority of suppliers and generators are opting for shorter term contracts of between one to three years. The few generators that are looking for longer term structures are those wanting to attract finance to enable them to develop renewable projects over the next few years, says Santokie. Indeed, despite the gloom in some sectors of the industry, Natsource is confident that the future market for ROCs will be "vibrant."