Renewable Obligation Certificates are certificates issued to eligible renewable electricity generators to support the adoption of renewable electricity in the UK energy market.
What are Renewable Obligation Certificates?
Ofgem is responsible for certifying renewable electricity generators for the Renewable Obligation scheme prior to the project being commissioned or when the project is about to start generating energy.
Once the generator is certified for the Renewable Obligation scheme for their electricity generation they need to submit monthly generation figures to Ofgem and to be issued with Renewable Obligation Certificates for the eligible electricity that they have generated. The Renewable Obligation Certificates can then be sold to the energy suppliers.
What is the Renewable Obligation?
The Renewable Obligation is scheme was introduced by the government as a way of incentivising renewable electricity generation in the UK by providing a financial mechanism to support eligible generators and to encourage energy suppliers to increase the amount of renewable electricity in their electricity fuel mix.
The Renewable Obligation is enforceable under the energy suppliers’ licenses and they are given a target each year for the number of Renewable Obligation Certificates they need to purchase.
If they do not purchase enough Renewable Obligation Certificates they have to pay the equivalent amount to Ofgem as a buy-out which goes into a fund to pay for Ofgem’s administration costs and any excess funds left are divided between the energy suppliers who met their obligation.
The Renewable Obligation is now closed to new applications and has been replaced with an alternative support mechanism for the development of new renewable electricity projects. The new scheme is called Contracts for Difference (CfD) which offers a top-up mechanism for all electricity production that the project produces over a fixed period.
Who is Eligible for Renewable Obligation Certificates?
Only renewable electricity generators are eligible for the Renewable Obligation Certificates for the electricity they generate, and they need to be certified by Ofgem to be eligible. The scheme is now closed for new participants so only preapproved or those already generating electricity that has been certified are eligible for the scheme.
Generators that have been certified for the scheme need to ensure that they adhere to the scheme rules to remain eligible.
What Does the Closure of the Renewable Obligation mean for Renewable Obligation Certificates?
Although the Renewable Obligation has now closed to new applicants there are still projects that are certified that are yet to come online and plenty of projects that were certified during the period that the Renewable Obligation was running that will continue to produce electricity.
So, the Renewable Obligation Certificates are still going to be issued and the Renewable Obligation is still placed on the energy suppliers until these certified projects reach the end of their agreed funding period.
The Renewable Obligation Certificates target will continue to be set each year as an obligation on the energy suppliers based on the capacity of the certified and eligible electricity generators until March 2027.
What is planned after for April 2027 onwards is still being consulted on by the government, but it is anticipated that a fixed price certification scheme will replace it which will be fixed at the 2027 buy-out rates plus 10%.
Who Regulates Renewable Obligation Certificates?
Ofgem is responsible for regulating and administering the Renewable Obligation Certificates. As part of this they do the following:
- Certify renewable energy generators for Renewable Obligation Certificates scheme
- Receive monthly electricity generation amounts from the generators and issue them with the Renewable Obligation Certificates
- Maintain a database and track Renewable Obligation Certificates
- Monitor the renewable generators for their eligibility for the scheme
- Ensure the energy suppliers adhere to the Renewable Obligation scheme and purchase the required amount of Renewable Obligation Certificates
- Administer the buy-out fund
- Set annual Renewable Obligation targets for each of the energy suppliers
How Do the Renewable Obligation Certificates Work?
The Renewable Obligation Certificates are created by Ofgem and issued to the renewable electricity generator who is then able to sell these certificates to the energy suppliers. Many renewable electricity generators will sell the electricity to the energy suppliers with the Renewable Obligation Certificates attached to them, but they can be sold independently.
The energy suppliers need to purchase the Renewable Obligation Certificates to reach their target and therefore they are obligated to purchase these certificates and hopefully the electricity generated to increase the uptake of renewable energy in the electricity fuel mix.
Certificates need to be purchased and redeemed during the period that they were issued by Ofgem or within the proceeding period. The energy suppliers need to submit the Renewable Obligation Certificates that they have purchased to Ofgem to register it against their annual target and for Ofgem to track the Renewable Obligation Certificates.