Renewables Obligation

The Renewables Obligation (RO) is the Government's main mechanism for supporting the generation of renewable electricity. It requires licensed electricity suppliers to source a specific and annually increasing percentage of their electricity from renewable sources. The current level is 9.7 percent for 2009/10, rising to 15.4 percent by 2015/16. This is set out in the Renewables Obligation Order.

It is expected that the RO, together with exemption from the Climate Change Levy for electricity from renewables, will provide support to industry of up to £1bn a year by 2010.

Eligible renewable sources
At the end of 2007, generation from renewable sources eligible under the RO stood at 4.9 percent. This rises to 5 percent if non-eligible sources are included. Source: BERR Energy trends June 2008.

The following table lists eligible renewable sources:

This table shows the eligibility of energy derived from waste:

Notes:
1    Subject to a maximum fossil-derived energy content of 10 percent.
2    CHP stations must be accredited under the CHP Quality Assurance Scheme to be eligible. Schemes that comply fully with the Good Quality benchmark receive Renewables Obligation Certificates (ROCs) on the electricity generated from the biomass fraction of the waste. For schemes that comply partially, this is scaled back depending on their efficiency.

• Only stations first commissioned or re-equipped on or after 1 January 1990 (except micro-hydro and co-firing stations) are eligible.
• All stations must be located within the UK, its territorial waters or the Continental Shelf.

How does the Renewables Obligation work?

The Renewables Obligation (RO) is enforced by an Order (Statutory Instrument) made under the terms of Section 32 of the 1989 Electricity Act. The Renewables Obligation Order was introduced in April 2002.
The RO requires electricity suppliers to source an annually increasing percentage of their sales from renewables. For each megawatt hour of renewable energy they generate, they receive a tradable certificate called a Renewables Obligation Certificate (ROC).

Suppliers can meet their obligation by:

• acquiring ROCs
• paying a buy-out price equivalent to £37.19/megawatt hour in 2009/10 and rising each year with the retail price index, or
• a combination of ROCs and paying a buy-out price.

When a supplier chooses to pay the buy-out price, the money they pay is put into the buy-out fund. Following the end of an Obligation period, the buy-out fund is recycled to electricity suppliers presenting ROCs.

For more information on government plans and strategies concerning renewable energy, please see the below documents:

• Consultation on Renewable Electricity Financial Incentives 2009 (pdf 1.3meg)
• The UK Low Carbon Transition Plan (pdf 5meg)
• The UK Renewable Energy Strategy 2009 (pdf 3.8meg)