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Department of Energy and Climate Change

Renewables Obligation

Renewables Obligation

8 December 2010: Renewables Obligation Banding Review 2013 – acceleration of review timetable

Energy Minister Charles Hendry announced today that the timetable for the 2013 RO Banding Review is being speeded up. The original timetable set out in the RO Banding Review Process document below indicated that the Government would launch a statutory consultation on new banding proposals in Spring 2012 and announce its decision on banding levels by Autumn 2012. DECC now intends to consult on new banding proposals in Summer 2011 and confirm the new bands by Autumn 2011, one full year ahead of schedule. The new bands will still come into effect as planned on 1 April 2013 (1 April 2014 for offshore wind), subject to Parliamentary and State Aids approval.

Under the previously announced timetable, investors would not have known for certain what support they could have expected to receive until Autumn 2012 at the earliest. The Government was concerned that this might delay early investment in certain technologies and hinder the UK’s ability to meet our EU target for 15% of energy to come from renewable sources by 2020. We believe that the accelerated timetable for the banding review will give investors and developers greater certainty and confidence to help bring forward the scale of renewables developments needed to deliver the target and other important energy and climate change objectives.

The current review started in October this year with the appointment of Arup and Ernst & Young to review the market costs and the potential of eligible renewable electricity technologies to provide the economic and technical evidence to underpin the revision of the RO bands. The report of this first phase of work is due to be delivered to DECC at the end of February 2011. We are today also inviting expressions of interest from qualified companies to undertake a project to model the impacts of different banding scenarios. This phase of the work will draw on the results of the Arup and Ernst & Young work and inform the development of DECC’s consultation proposals, which we aim to publish in July 2011.


November 2010: Stakeholder information gathering exercise

As mentioned below, DECC has recently launched the scheduled RO banding review. We have commissioned independent consultants Arup and Ernst & Young to assess the deployment potential and generation costs of renewable electricity technologies.

If you would like to contribute to the Arup and Ernst & Young stakeholder information gathering exercise, have not already been contacted directly, and have a strong interest/detailed knowledge in this area (e.g. generation costs for a prospective project in a particular technology), please contact the banding review team at the following address: Kieran.Power@decc.gsi.gov.uk by Friday 10th December. In your email, please describe your interests in the issue and outline the nature of the information that you wish to contribute.

If you make contact after this time, we will endeavour to use your input, but we might not be able to do so.


October 2010: Result of competitive tender

DECC are pleased to announce that, following competitive tender, we have selected ARUP to take forward the renewable technology costs project that will inform the 2013 Banding Review.

The project will look at the costs and revenues of eligible technologies to help determine the levels of support these might require going forward.

ARUP will be in touch with stakeholders shortly to discuss costs. We thank you in advance for your cooperation.

The Renewables Obligation (RO) is the current main mechanism for supporting large scale generation of renewable electricity. The Spending Review of 20 October 2010 announced that this will continue, confirming the Government's commitment to the Renewables Target. Since its introduction in 2002, it has succeeded in more than tripling the level of renewable electricity in the UK from 1.8% to 6.64%1 and is currently worth around £1.42 billion/year in support to the renewable electricity industry. The Spending Review of 20 October 2010 announced that this will continue, confirming the Government's commitment to the Renewables Target.

Since its introduction, the RO has been subject to various reforms and improvements. The most significant being in April 2009, with the introduction of banding, where different technologies receive different levels of support, providing a greater incentive to those that are further from the market with potential to deploy on a large scale.

In April 2010, further changes included the RO being extended from its current end date of 2027 to 2037 for new projects, in order to provide greater long-term certainty for investors, and an increase in support for offshore wind projects meeting certain criteria.

The RO works by placing an obligation on licensed electricity suppliers to source a specified and annually increasing proportion of their electricity sales from renewable sources, or pay a penalty.

The obligation in England & Wales for 2010/11 is 0.111 ROCs per MWh i.e. approximately 11% renewable electricity3.

The RO is administered by Ofgem who issue Renewables Obligation Certificates (ROCs) to renewable electricity generators. Previously, 1 ROC was issued for each megawatt hour (MWh) of eligible generation, regardless of technology. As of 1 April 2009, the reforms introduced mean that new generators joining the RO now receive different numbers of ROCs, depending on their costs and potential for large-scale deployment. For example, onshore wind continues to receive 1 ROC/MWh, offshore wind currently receives 2 ROCs/MWh, and energy crops 2 ROCs/MWh.


Statutory Consultation on Renewables Obligation Order 2011

The current consultation on changes to the RO (which would come into effect on 1st April 2011) closed on 19 October 2010. Full details are available on the Statutory Consultation on the Renewables Obligation Order 2011 (ROO 2011) web page.


Renewables Obligation (Amendment) Order 2010

The Renewables Obligation (Amendment) Order 2010 has been approved by both Houses of Parliament and came into force on 1 April 2010. The Order introduces changes to the RO including extending it to 2037, providing additional support for offshore wind projects and making provisions for the transition of certain categories of generator to the Feed-In Tariffs scheme.


A consolidated version of the order


Renewables Obligation Banding Review Process


Following the introduction of banding in April 2009, it was agreed that the bands for all technologies would be reviewed at regular intervals. The attached document sets out the process for the 2010 - 13 banding review and the principles to be followed for future early reviews.

RO Banding Review Process Size: [217 KB] File Type: [.pdf]

Review of support for offshore wind

As part of the Budget 2009, the Chancellor announced that we would be reviewing the level of RO support for offshore wind.

The decision to launch an early review was based on evidence provided to DECC, including a report produced by Ernst & Young on our behalf. We published this report on 27 April 2009 and it is available below:

Following the conclusion of the review process, including a consultation on proposals to award a higher level of support to offshore wind projects meeting certain conditions, we announced in the Government Response that all offshore wind projects granted full accreditation between 1 April 2010 and 31 March 2014 would receive 2 ROCs/MWh.

Further information on this announcement is set out in the Q&A document below:


Calculating the Obligation

Article 12(4) of the Renewables Obligation Order 2009 requires that the Secretary of State must publish, by the 1st October preceding an obligation period, the number of renewables obligation certificates that a designated electricity supplier is required to produce in respect of each megawatt hour of electricity that it supplies to customers in England and Wales during that period in order to discharge its renewables obligation for that period.

The  Department can today confirm that the Obligation level for supplies to customers in England and Wales for the period running from 1 April 2011 to 31 March  2012 has been set by using Calculation B and will be 0.124 ROCs per MWh (megawatt hour).

The Obligation level for supplies to customers in England and Wales for the period running from 1 April 2010 to 31 March 2011 is 0.111 ROCs per MWh (megawatt hour).

Details of how the Obligation level was calculated can be found in the document below:


Review of the removal of the requirement for ‘sale and buyback’ agreements: 18 January 2010.

In April 2007 an administrative simplification was made to the Renewables Obligation (RO) legislation which removed the requirement for generators who consume their own electricity to enter into ‘sale and buyback’ agreements in order to claim Renewables Obligation Certificates (ROCs). Ministers agreed to conduct a review of the removal of the requirement once the legislation had been in force for 2 years. The results of the review are set out in the document below.


1  Department of Energy & Climate Change, June 2010 Energy Trends
2  Ofgem - http://www.ofgem.gov.uk/Sustainability/Environment/RenewablObl/Pages/RenewablObl.aspx
3  Published by Secretary of State - Department of Energy & Climate Change

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