Renewable Obligation Certificates
From Ppca
Renewable Obligation Certificates
or how to encourage a free for all
ROCs came into force April 1, 2002, replacing the Non-Fossil Fuel Obligation.
Issued under the terms of the Renewables Obligation Order, the Renewables Obligation Order (Scotland) and the Renewables Obligation Order (Northern Ireland).
What is a ROC ?
ROCs are certificates that act as proof of renewable source (eg photovoltaic, wind). The "obligation" element is because electricity suppliers (EDF, npower etc) must source a legally prescribed minimum of their supply from renewables. In 2005-06 this minimum was 5.5% in England, Scotland and Wales (2.5% in Northern Ireland). 2006-07: 6.7% (2.6% in NI). 2007-08: 7.9%. By 2015-16, in England, Scotland and Wales, it reaches 15.4% and remains at this level until 2026-27.
One ROC per 1MWh generated, net of input (ie the electricity required to drive the generator itself, if this is more than 0.5% of gross output in an obligation period).
ROCs are issued by Ofgem, which administers the scheme, to Ofgem-accredited generators.
The value of a ROC is determined by market forces. ROCs can be sold to third parties or through auction, such as that run by e-ROC (a subsidiary of the Non-Fossil Purchasing Agency); see Appendix 1. The end-users are UK licensed electricity suppliers.
Quarterly average price for ROCs (excluding co-fired) from e-ROC auction
Oct 06 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 £46.18 £46.15 £47.51 £48.12 £49.27 £49.92 Source: Non-Fossil Purchasing Agency; www.nfpa.co.uk
How it works for UK licensed electricity suppliers
Suppliers meet their obligatory targets by buying ROCs, or by paying a buy-out price to Ofgem, or a combination of the two. The buy-out price is adjusted annually, in line with inflation (specifically the Retail Price Index). The buy-out price per ROC for 2006-2007 was £33.24. For 2008-09 it is £35.76. Monies received via buy-outs go into one of the three buy-out funds (England and Wales; Scotland; Northern Ireland). Each year the proceeds of the buy-out funds are redistributed among the suppliers in proportion to the number of ROCs that they held.
OFGEN buy-out data for 2006-07
The total values of the RO buy-out funds redistributed on 1 October were; £217,888,311 for England and Wales, £9,662,865 for Scotland and £6,628,093 for Northern Ireland (all including interest). The amount paid to suppliers from the buy-out fund for each ROC they presented was £16.04. Appendix 2 shows how the three buy-out funds and late payment funds have been recycled to suppliers.
How long do ROCs last ?
ROCs have a shelf life of two obligation periods. This means that a ROC issued in 2006/07 is eligible to be redeemed by licensed electricity suppliers to meet their obligations in the 2006/07 and 2007/08 obligation years, i.e. 1 April - 31 March. The value of a ROC is likely to drop if it is not used in the obligation year that it is generated. This is because the suppliers have a limit on the number of 'banked' ROCs (ROCs representing generation from the previous obligation year) of 25% of their obligation.
Who bears the cost of the ROCs?
The end-user, ie the supplier, who passes the cost on their customer (ie you and me).
The value of ROCs to a generator
4 MW installed capacity, 38% efficiency Total electricity generated = 4 X 0.38 X 24 X 365 = 13,315 MWh Total ROC value at January 2008 price (£49.92) = £664,695
4 MW installed capacity, 20% efficiency Total electricity generated + 4 X 0.2 X 24 X 365 = 7,008 MWh Total ROC value at January 2008 prices = £349,839
Note that this is in addition to the price received for selling surplus energy to the grid.
Total projected use by Sedborough project:
Creamery: 1.75m kWh (1,750MWh) Farms: 2.3m kWh (2,300MWh) Total: 4,050MWh Notional surplus if turbines operate at 20% capacity = 2,958 MWh
CCLs and LECs: a further subsidy
The climate change levy (CCL) is imposed on electricity supply to non-domestic users, at a current rate (as of April 2007) pf £4.41 per MWh. LECs (Levy Exempt Certificates) are electronic certificates for offsetting against the CCL. Their use is restricted to electricity consumed in the UK (ie not electricity generated in the UK but exported). They can be issued for foreign-generated electricity used in the UK. The scheme is run jointly by Ofgem and HM Revenue and Customs. Ofgem issues the LECs, at 1 LEC for 1MWh, to Ofgem-accredited generators.. HM Revenue and Customs decides whether LECs for a particular business can be offset against a CCL.
e-ROCs
On-line auctions: e-Roc (subsidiary of Non-Fossil Purchasing Agency)
- Before each auction, NFPAS write to licensed electricity suppliers, inviting them to register to participate in the auction.
- Registered suppliers are given a username and security password to gain entry to the auction via the e-ROC website.
- Registered suppliers can view the lots on offer, then on the day of the auction, they log on to the e-ROC website and formally make a bid for individual lots, or groups of lots, on a price per ROC basis.
- Lots are awarded to the supplier who submits the highest bid, which is not bettered after a period of 1 hour. Successful bidders are then notified via email.
Bidding takes place over a secure internet service. During the auction, all participants are able to see current highest bids, and final bid prices, though all participants are anonymous. e-ROC
e-ROC FAQs
What must I do to sell my ROCs in the e-ROC auction?
The first step is to enter into the Agency Agreement and transfer the ROCs to our ROC holding account.
As a new user, how long will it take to register for an auction?
You can send signed Acceptance Forms at any time but no later than 15 days before the date of the auction. This will allow details of your ROCs to be shown on the auction site 10 days before the auction starts.
How will I get paid for the ROCs sold at auction?
Following the auction and after payment has been received from the successful bidders, we will ask you to send an invoice to us. We will then make payment to you, less our fees. Payment is usually made within 20 banking days of the auction.
How much will it cost me to sell my ROCs through the e-ROC auction?
The charge is 50p + VAT per ROC, subject to a minimum fee of £50 + VAT. This means any quantity up to 100 ROCs will cost £50.
Can I specify a reserve price for my ROCs?
Yes, if you wish, you may agree with us a reserve price for the ROCs you place in our auction. Up to January 2007, our auctions operated without minimum or reserve prices and there has been little variation in the prices achieved in each auction (see Track Record).
How many ROCs are in a lot?
The size of lots can vary from a few hundred to a few thousand; there is no set size.
Why are suppliers willing to buy lots in the auction at more than the 'buy out' price published by Ofgem (2007/08 £34.30)?
By submitting ROCs to Ofgem they avoid having to pay the 'buy-out' price and benefit from a payment from the 'buy-out fund'.
How can I be sure I'll get the best price for my ROCs?
There are no guarantees, but you only have to look at our record-to-date to compare what you could have sold your ROCs for, compared with the prices you have been getting. We think you'll find our results very attractive.
Do I have to sell my electricity to NFPAS to sell my ROCs via e-ROC?
There is no obligation to sell your electricity to us, although if you wish to do so, you can sell your electricity through NFPA's power auctions.
Can I sell co-fired ROCs through e-ROC online auctions?
Yes. We have sold co-fired ROCs alongside ordinary ROCs in the e-ROC online auctions.
