Renewable Obligation Certificate's (ROC’s)
Renewable Obligation Certificates, frequently referred to as ROC’s could provide an additional and lucrative revenue stream to the project.
What is a Renewable Obligation Certificate (ROC)?
A ROC is a “green certificate issued to an accredited generator for eligible renewable electricity generated within the United Kingdom and supplied to customers within the United Kingdom by a licensed electricity supplier” [1].
ROC Targets
The renewable obligation order came into effect in Scotland in April 2002 and the scheme was set up as an incentive to encourage licensed electricity suppliers to produce an increasing proportion of their electricity generation from renewable sources.
When the scheme first started in 2002/2003 the target was only 3%. It has risen year on year, to the current target of 9.1% for 2008/2009 and this target will rise to 10.4% for 2010/2011 and again by 1% per year, until to 15.4% by 2015/2016 [2]. Once this 15.4% level is obtained, it will remain flat until the end of the obligation, which is scheduled to conclude in 2027.
Percentage target variations over the duration of the order can be clearly observed below:
How Suppliers Fulfil the Obligation
Suppliers meet their obligation by presenting sufficient Renewables Obligation Certificates (ROCs) and one ROC is issued per megawatt hour (MWh) of eligible renewable output generated. However, should suppliers fail to possess sufficient ROCs to meet their obligations, they have the option to:
· Purchase ROC’s on the open market; e.g. from other companies who have an excess; or
· They can use a buy-out clause; where they must pay an equivalent amount into a fund, and the fund is “redistributed to electricity suppliers as a proportion of ROCs presented at the end of the 12 month Obligation period” [3].
They can also use a combination of purchasing ROC’s and the buy-out clause to fulfil the obligation.
Value of ROC’s
The price of a ROC has grown year on year since the order came into play, which is inline with the annual percentage target increases so far. This can be observed in the following graph and the current price for 2009/2010 is £37.19.
ROC Facts
ROC Facts [4] [5] :
· ROC’s have a shelf life of two obligation periods.
· Suppliers have a limit on the number of 'banked' ROCs; ROCs representing generation from the previous obligation year; of 25% of their obligation.
· The Government has agreed that suppliers will have to comply with the Renewables Obligation until 31st March 2027.
· The value of a ROC for 2009/2010 is £37.19 per MWh.
· The mutualisation ceiling for 2009/2010 is £22,400,000 for Scotland.
Possible Re-banding of ROC’s
There has been talk of banding ROC’s according to the renewable generation technology utilised, as highlighted in the following table [6]:
Proposed Banding of the Renewable Obligation |
||
Band |
Technologies |
ROC’s / MWh |
Established |
Sewage gas, landfill gas, co-firing of non-energy crop biomass |
0.25 |
Reference |
Onshore wind, hydro-electric, co-firing of energy crops |
1.0 |
Post-demonstration |
Offshore wind, dedicated regular biomass |
1.5 |
Emerging technologies |
Wave, tidal stream, advanced conversion technologies (anaerobic digestion, gasification, pyrolysis) dedicated biomass burning energy crops, dedicated regular biomass with CHP, photovoltaics, geothermal. |
2.0 |
However, should this proceed, onshore wind generation will remain at one ROC per MWh and any ROC calculations for this project will therefore be unaffected.
ROC’s Effect on the Project
It is expected that all of the project case studies will produce excess ROC’s and these will be sold to provide an additional source of revenue. An assumption being that 85% to 90% of the ROC’s generated will be sold (depending on the year), as these will be in excess of the legal obligation.
It is also important to try to estimate the future value of a ROC to ensure accurate project economics. Therefore, to estimate the future value of ROC’s, the graph has been extended inline with target growth, until the 15.4% level was achieved. Where this maximum target occurs (2016/2017), it has been assumed that the value of a ROC will remain constant.
References:
[1] Renewables Obligation:
http://www.ofgem.gov.uk/Sustainability/Environment/RenewablObl/Pages/RenewablObl.aspx[2] Renewables Obligation:
http://www.ofgem.gov.uk/MEDIA/FACTSHEETS/Documents1/6709-factsheet39_april04.pdf[3] The Renewables Obligation:
http://www.parliament.the-stationery-office.com/pa/cm200708/cmselect/cmdius/216/21608.htm[4] Value of a Renewable Obligation Certificate (ROC) for 2009/2010:
http://www.ofgem.gov.uk/Sustainability/Environment/RenewablObl/Documents1/Press%20Release%20buy%20out.pdf[5] Renewable Obligation Certificates:
http://www.ppca.org.uk/index.php/Renewable_Obligation_Certificates[6] The Renewables Obligation:
http://www.parliament.the-stationery-office.com/pa/cm200708/cmselect/cmdius/216/21608.htm
