Ofgem publishes total renewables obligation for 2018/19

Ofgem issued 129 million renewables obligation (RO) certificates for the 2018/19 year.

The obligation levels for April 2018 – March 2019 were set by the Department for Business, Energy and Industrial Strategy (BEIS) were:

• 0.468 ROCs per MWh of electricity supplied to customers in England, Wales and Scotland
• 0.185 ROCs per MWh of electricity supplied to customers in Northern Ireland

This takes the total number of certificates to:

• 115,949,919 in England and Wales
• 11,611,524 in Scotland
• 1,433,328 in Northern Ireland

Suppliers have until 1 September to meet their obligations for 2018/19 (31 August for buy-out payments) by:

• Presenting ROCs to Ofgem
• Making a buy-out payment of £47.22 per ROC
• Using a combination of ROCs and a buy-out payment

Any suppliers who do not meet their obligations in full by the end of 1 September will need to make a late payment by 31 October.

The RO requires suppliers to buy a certain percentage of the power they sell from renewable sources. Accredited generators receive a set number of ROCs for each megawatt hour they produce. They can then sell these certificates to suppliers.

Suppliers must present enough ROCs to Ofgem each year to demonstrate they have met their yearly obligation and make up any difference with buyout payments.

These payments are first used to cover the administration costs of the scheme, with the rest being returned to suppliers in proportion to the number of ROCs they submitted to Ofgem.

If the outstanding payments following the final deadline exceed a certain threshold known as the relevant shortfall, a process called mutualisation is triggered.

Suppliers that met all or part of their obligation must pay into a mutualisation fund according to their share of the overall obligation for the year in question, taking into account that failed suppliers cannot contribute.

The money collected is then returned to suppliers in proportion with the number of ROCs they presented to Ofgem. Those that have failed to meet their obligation in full are not entitled to receive any payments.

The mutualisation ceiling represents the maximum amount of money that can be redistributed through this process.

Last year Ofgem said an “unprecedented” 34 suppliers had failed to meet the 1 September deadline for making buyout payments for 2017/18, and collectively owed nearly £103 million.

The following month the regulator announced a mutualisation process would be triggered for the first time ever after suppliers failed to pay off enough of the deficit to bring it below the relevant shortfall.

The deficit was later revealed to total £58.6 million across the whole of the UK.

In February Ofgem announced the buyout payment for ROCs in 2019/20 will rise from £47.22 currently to £48.78, reflecting a 3.3 per cent increase in the retail price index during 2018.

Ofgem has also raised the mutualisation ceiling for the RO scheme in line with inflation. It has been set at almost £294 million for England and Wales – a £9.3 million increase on the current level – and £29.4 million for Scotland.