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Rough guides to Feed-In tariffs and Renewables Obligation

Renewables Obligation

The Renewables Obligation (RO) is the Government subsidy mechanism for encouraging the growth of large-scale renewable energy in the UK to help meet its carbon reduction objectives. The UK is obligated to generate 15% of its energy from renewable sources by 2020.

The RO places obligations on UK suppliers to source an increasing proportion of electricity from renewable sources. Renewables Obligation Certificates (ROCs) are issued by Ofgem to renewables operators for the eligible energy generated. ROCs are issued per megawatt hour (MWh).

Energy from waste technologies including CHP (Combined Heat and Power), Advanced Conversion Technologies (ACT) (gasification and pyrolysis), landfill gas, and biomass are eligible for ROCs

Operators can trade ROCs. The buy-out price for the 2012/13 Obligation is £40.71 per ROC – and are eventually a used by suppliers to demonstrate they have met their obligations. Various renewable technologies are banded and attract varying levels of ROCs/MWh.

Banding changes aim to reduce support where possible without significantly affecting deployment, and maximise deployment of the cheapest technologies. 

 

Feed-in-Tariff explainer box

The feed-in-tariff (FiT) is a guaranteed fixed rate of incentive for small-scale (<5MW) renewable energy generation launched in 2010. Eligible technologies include wind, solar, hydro, micro CHP and AD. Generators receive a rate for electricity generated and electricity exported to the grid.

In its July 2012 announcement the Government introduced a degression mechanism decreasing the tariff costs over time to reflect falling technology costs as capacity increases. AD has a baseline degression of 5%, so FiT rates fall by 5% a year if deployment happens in line with DECC’s assumptions. If deployment capacity exceeds or falls short of expectations, the degression rate will increase or decrease.

AD plants are banded according to generation capacity for the purposes of FiTs.

 

 Level of overall annual deployment required to trigger degression
Degression band:2.5%5% (baseline)10%20%
AD band:≤500kW≤2.3MW>2.3 - 4.5MW4.5 - 9MW9MW
>500kW-≤5MW≤19.2MW≤19.2MW - 38.4MW>38.4 - 76.9MW>76.9MW

 

AD FiT tariff rates from Dec 2012 (pence per kWh, 2012 prices):

AD Band (kW)Tariff
≤25014.70
>250-≤50013.60
>500 - ≤5000 (5MW)8.96

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