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How Does the Renewables Obligation Work?

The Obligation 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 Obligation requires suppliers to source an annually increasing percentage of their sales from renewables. For each megawatt hour of renewable energy generated, a tradable certificate called a Renewables Obligation Certificate (ROC) is issued.

Suppliers can meet their obligation by:

  • acquiring ROCs
  • paying a buy-out price equivalent to £35.76/megawatt hour in 2008/09 and rising each year with 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.

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