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What exactly are ROCs and why is it important for renewable energy generators?

Published: 13:06 28 Feb 2019 GMT

Wind Farm
ROCs are used to push electricity suppliers to buy more renewable energy

In its full-year results on Thursday, chairman of FTSE 250 renewables group Greencoat UK Wind PLC (LON:UKW), Tim Ingram, said the firm expected the majority of its future investments to be made from the “£50bn pool of UK Wind farms accredited under the ROC regime”.

But what exactly is an ROC, and why is it important for renewable energy generators like Greencoat?

READ: Greencoat UK Wind delivers strong return buoyed by acquisitions

A Renewables Obligation Certificate (ROC) is essentially a green energy document that formed part of the Renewables Obligation (RO) scheme, introduced in England, Wales and Scotland in 2002 and Northern Ireland in 2005, which obligated electricity suppliers to buy a specific proportion of their energy from renewable sources.

ROCs were issued to accredited renewable energy generators for every megawatt hour (MWh) of electricity they produced, although the number of ROCs could vary depending on the type of technology used (e.g in 2014/15 offshore wind power would receive two ROCs for every MWh, while onshore wind would receive 0.9 ROCs).

These certificates would then be bought by electricity suppliers for a premium on top of what they had paid for the electricity and shown to the energy regulator Ofgem to prove they had met their obligation.

If a supplier failed to meet its obligation level, Ofgem would fine it a set amount linked to the retail price index (known as the ‘buy-out price’) for each missed certificate, which would then be re-distributed pro-rata to suppliers who had presented the ROCs.

However, in 2017, Ofgem said that all new generating capacity would not be eligible for the scheme after 31 March, but all capacity before then would still be viable for ROCs over 20-year periods until the end of 2037.

According to Greencoat’s investment manager, Stephen Lilley, this ‘grandfathering’ of the ROCs means that half of the firm’s revenue is “fixed” until the 2037 cut off, with the other half linked to wholesale electricity prices.

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