Extracts from NATTA's journal
Renew, issue 144 July- Aug 2003

8. RO buy-out price up but a missed opportunity for rapid growth

The energy regulator Ofgem, has set the buy-out price for the second year of the Renewables Obligation at £30.51 per MWh- only marginally (50p) more than in the first year. The buy-out price allows electricity suppliers to make up any shortfall between the amount of their obligation and the number of Renewables Obligation Certificates (ROCs) they can earn by using renewably sourced power. It also, in effect, sets the value of the ROCs, which can be traded, and also imposes a ceiling on the price at which suppliers will buy in renewable power from generators.

The Government set the buy-out price at £30/MWh for the first year of the Renewables Obligation, and with conventional electricity prices being around 2p/kWh, at least initially, the ceiling was thus 5p/kWh. A larger increase in the buy out price could have helped push renewables on faster, since it would have pushed the ceiling up. The DTI says that ‘the buy-out price is adjusted each year to reflect changes in the retail prices index’, but it could surely also be used as a way to speed things along- if the DTI wanted the target of 10% from renewables by 2010 to be met. The new rate applies for the obligation period 1 April 2003 to 31 March 2004 and also covers the Scottish RO. Maybe next year it will be increased a bit more radically. The only down side is that, as more renewable energy projects then came online, this would gradually put up consumer prices slightly, but the 3p/kWh buy out price will only lead to an increase of an estimated 5% by 2010.

The Renewables Obligation started in April 2002 and requires electricity suppliers to supply increasing proportions of their total sales in Great Britain from electricity generated from renewable sources, starting at 3% in 2002 - 2003 and reaching 10.4 % in 2010 - 2011. See our cover. One ROC represents 1MWh of electricity generated from eligible renewable sources.