What is the Renewables Obligation?
Read our submission to the Government's Review of the Renewables Obligation (pdf).
This is a legal requirement for electricity supply companies to buy a set percentage of their electricity from renewable energy sources. This percentage is set to rise annually, to a level of around 15% in 2015.
It works like this: The supply companies need not generate renewable electricity themselves, but can buy it in from companies that generate electricity from renewable sources. The renewable energy company gets what is known as a Renewables Obligation Certificate (ROC) for each Megawatt hour (MWh) of electricity generated from renewable sources.
Supply companies buy electricity to supply to consumers, then also have to buy the certificates which prove that they have used electricity from renewable energy sources, which is put toward meeting their obligation targets. The electricity goes straight into the National Grid from the generator.
If the supply company fail to meet their annual Renewables Obligation percentage commitment, they can pay a forfeit on the shortfall, currently valued at £30 per MWh. This is known as the Buy-Out Price and is put in a ring-fenced fund. This fund is then redistributed back to the electricity supply companies in proportion to the number of certificates they produce.
The extra costs incurred in meeting the obligation are transferred to consumers through their bills.
MPs need to urgently address the imbalance which the Renewables Obligation is creating in the renewable energy market, where the focus and profits is firmly with on-shore wind projects.
The Renewables Obligation, while outstandingly effective in bringing forward projects for generating electricity from renewable energy sources, is encouraging on-shore wind turbines as the almost exclusive means of producing this renewable power. This technology relies on an unpredictable energy source and is very intrusive in our landscapes. The financial driver of the Renewables Obligation does not differentiate between the different technologies and their state of market readiness, with the result that business interests are concentrating on the cheaper and more readily available technology at the expense of developing the market for other, more predictable and less intrusive forms of electricity generation.
We need to reform financial support that will achieve technological diversity in the renewable energy sector.
A recent National Audit Office report on renewable energy highlighted the issue that the Renewables Obligation provides more financial support than is necessary to generate electricity from some onshore wind projects. The Renewables Obligation is a market-based mechanism which is deliberately designed to incentivise the most economic renewables schemes.
There is a need to ensure that targets for energy efficiency and demand reduction across all sectors are set and met in order to meet our CO2 emissions targets.
The cleanest unit of energy is the one that is not produced. Government must take the lead in ensuring that emission reductions are achieved across all sectors of society, and not rely mainly on electricity generation from renewable sources to reach the target. The reliance of electricity from wind turbines feeding our existing transmission and distribution system runs the danger of instability in the grid. There is a clear need to plan for an appropriate energy mix which will ensure a secure and efficient supply of electricity from renewable sources, in locations which can accommodate them without adverse environmental impacts.
Create a UK Task Force to take forward action to address climate change.
At the moment there is no mechanism to bring together at a UK level key stakeholders from all sectors to work together on climate change. The Government should establish a high level task force to bring stakeholders together to assist in developing climate change policies and monitor their delivery. Devolved administrations would need to play a key role.
