Renewable Obligation Certificates - An explanation

ROCs (Renewable Obligation Certificates) are the record of the generation of renewable energy and how much CO2 has been saved.

Since April 2002 all UK electricity suppliers have had an obligation to ensure that a part of the electricity they supply has been derived from non CO2 emitting or renewable sources. This can include Wind, Solar, Hydro and Biomass.

A ROC represents 1,000 units (1MWh) of renewable electricity or approximately the saving of 1 tonne of CO2 emmissions.

Electricity generators have an obligation to generate a certain proportion of their electricity from renewable sources, this is their Renewable Obligation. Should they fail to meet this renewable obligation they must purchase ROCs (from somebody) to make up that obligation. If they generate more electricity from renewable sources than they are obliged to, they have an excess that can be sold!

This means that on the one hand ROCs are tradeable, on the other, it encourages the generation of electricity from renewable sources so that the power comapny does not have to purchase ROCs.

The price of a ROC effectively represents the the difference between the amount of green power that energy companies are obliged to generate eg. 6.7% in 2007 and the actual amount generated which is currently (start of 2008) about 6%. The greater the disparity, the higher the price of the ROC as set by the market.

Every year the renewables obligation is increased by the Government, this is the 10% by 2010 and 20% by 2020 that is often referred to in the press.

ROCs are currently valued at about £40, however with the current round of wind farms being built, this might go down!

ROCs and the small scale Renewable Energy generator.

A small scale microgenerator is classed as one generating (or exporting) less than 50kW.

ROCs can be sold on the open market by those people who are registered as a generator under OFGEM. That's the good bit.

The bad bit is you need to go through a broker and they charge a fee per ROC! Though the fee might be low 50p in some cases, they can insist on a minimum number of ROCs or fee.

OFGEM then purchase these ROCs from the broker at an inflation adjusted price.

One way for the smalll scale generator to gain as much as possible of their ROC is to switch to a tariff such as Scottish and Southern's that include a an additional payment per unit exported to account for the value of the ROC.