Presentation to Sustainable Energy Ireland 6 May 2003 The Renewables Obligation Catherine Murray Renewables Policy Department of Trade & Industry

The Basics What is it? ua legal duty on everyone with a GB electricity supply licence To do what ? usell specified amounts of renewable electricity to customers in GB (or get someone else to) For how long? uevery year (April-March) until 2027 How much? u3% of (licensed) sales in 2002/3, rising to 10.4% in 2010/11 and every year from then until March 2027

How Much?

How Does It Work? u developers build plant u Ofgem accredits eligible generating stations u stations generate u Ofgem certifies eligible output monthly 3 months in arrears u generators sell output u market trades ROCs u suppliers produce evidence to Ofgem by 1st October

What is a ROC? u represents 1 MWh of eligible renewables generation u the only evidence of supply accepted u issued by Ofgem u an entry in Ofgem electronic register u tradable with, or separately from, the electricity u traceable back to generating station and month u supplier must be registered holder of ROC to use it u suppliers can meet 25 % of Obligation from last year’s ROCs u once used cannot be revoked or re-used

Eligibility u all renewable sources u and only renewable sources u except peat u but not all generating stations

Sources In: wind wave hydro tidal tidal stream solar (but need 0.5 MWh/month) geothermal landfill gas/sewage gas all biodegradables other Out: oil gas coal/coal mine methane nuclear

Generating Stations Exclusions u outside the UK, its territorial waters or Continental Shelf u existing large hydro (commissioned before 1 st April) u commissioned before 1990 and not refurbished since unless co-fired or micro hydro (1.25 MW or less) u co-fired from 1 st April 2011 and from 1 st April 2006 if less than 75% energy crops in the biomass NB: suppliers can only meet 25% of obligation from co-firing in any year u fuelled by waste unless: waste is “biomass” or converted to fuel using “advanced conversion technology” NB: “biomass” may be waste but must be 98% biomass

The Buy-Out What is it? ua fee payable to Ofgem for each ROC a supplier is short uan alternative means of compliance with the Obligation - not a fine Price? u£ 30/MWh (ROC), indexed by RPI (£30.051p/MWh for 2003/04) What happens to the money? urecycled to suppliers in proportion to ROCs

Prospective Changes? During consultation Government stated: uno plans to reduce level of Obligation – proposed constant until at least 2027 and may well increase uno plans to lower buy-out price during the life of this initial Obligation uno plans to curtail duration of Obligation Nor is there any intention to exclude any of the eligible sources Planned changes? uMutual recognition of ROCs – GB and Northern Ireland- after Obligation introduced in Northern Ireland uEU certificates of origin for those who are not eligible NB: all changes require prior consultation before legislation is introduced Reviews? uAre reviewing technical drafting for clarity currently uEnergy White Paper issued – longer term aspirational target for 2020

Prospects? MW Now Biomass Wind – onshore offshore Landfill gas Photovoltaics Small hydro Others Total

How well is the Renewables Obligation working? u Working smoothly and well; well received u Strong demand for renewables electricity and ROCs u Shortage of supply – as anticipated u ROC price held up well u January 2003 auction of Scottish ROCs – £47.46/MWh u Level of planning applications u Problems – energy crops important for 10% target but much more planting of energy crops needs to take place.