Shortfall of 31% in meeting Renewables Obligation

Energy regulator Ofgem reports a substantial 31% shortfall in meeting last year's Renewables Obligation (RO) due to the severe shortage of renewable energy capacity in the UK. The RO requires electricity retailers to source a rising proportion of their power from renewables until it reaches 15.4% of electricity supplied in 2015-2016. For the year 2004-2005 the obligation on retailers stood at 4.9%. They meet their obligation by buying Renewables Obligation Certificates (ROCs) or by paying a "buy out" penalty. The buy out money is then shared between those who have complied with their obligation in proportion to the amount of ROCs tendered. While retailers last year should have acquired a total 15.8 million ROCs, they only managed to secure 10.9 million-69% of their total obligation. The shortage of ROCs was most acute in Scotland, where retailers met on average only 62% of their obligation, compared with 70% in England and Wales. This is because they chose to redeem their ROCs south of the border rather than in Scotland. Fiona Santokie from brokers Natsource Europe explains that income from the buy out money is fairly predictable in England and Wales where there is a larger number of retailers and more competition. "That is not the case in Scotland. ScottishPower and Scottish and Southern Energy control the majority of the Scottish market so it is a lot more open for manipulation."