Renewables Obligation

Page type: primary-anchored (mirrors Renewables Obligation Order 2015, SI 2015/1947)

Last updated: 2026-04-05

The Renewables Obligation (RO) is the principal support mechanism for renewable electricity generation in Great Britain. It requires licensed electricity suppliers to source a specified proportion of their supply from renewable sources, evidenced by presenting Renewables Obligation Certificates (ROCs) to Ofgem. The RO is closed to new entrants but continues for existing accredited stations until 31 March 2037.

Source file: ~/knowledge/sources/ofgem/schemes/ro-order.md

Legal framework

The RO is made under sections 32-32M of the Electricity Act 1989. The current governing instrument is the Renewables Obligation Order 2015 (SI 2015/1947), which replaced the 2009 Order. It extends to England and Wales only; Scotland has a parallel Scottish Renewables Obligation under separate orders. Northern Ireland has its own scheme under the Energy (Northern Ireland) Order 2003.

The RO is closed to new accreditations by the Renewables Obligation Closure Order 2014 (SI 2014/2388), with limited grace period provisions for stations that obtained planning consent or grid connection offers before closure dates. Existing accredited stations earn ROCs for up to 20 years from accreditation, with a hard stop at 31 March 2037 (Art. 44).

The obligation mechanism

Who is obligated

Every designated electricity supplier in England and Wales must produce UK ROCs to Ofgem by 1 September following each obligation period (1 April to 31 March) (Art. 7).

How the obligation level is set

The Secretary of State sets the obligation level annually using two calculations (Arts. 8-12):

• Calculation A: estimated GB electricity supply x 0.154, plus estimated NI supply x 0.063. This represents a fixed renewables target of approximately 15.4% of GB supply.
• Calculation B: estimated UK ROCs likely to be issued for renewable electricity, increased by 10%. This "headroom" inflates the obligation above expected renewable output.

The total obligation is the greater of Calculation A and Calculation B (Art. 12). In practice, Calculation B has dominated since renewable output exceeded 15.4% of supply, meaning the obligation ratchets up with actual generation.

The obligation rate

From 1 April 2019, the required ROCs per MWh of "relevant electricity" (supply excluding EII excluded electricity) is published by 1 October preceding each obligation period (Art. 13A). The formula adjusts for Energy Intensive Industries exemptions.

ROCs: issue, trading, and presentation

Accreditation

A generating station must be accredited by Ofgem to receive ROCs (Art. 89). Accreditation requires: - The station is commissioned - It generates from renewable sources - No CfD or investment contract exists (Art. 89(4)) - Required planning consents are in place

Preliminary accreditation is available for proposed stations not yet commissioned (Art. 88).

How ROCs are issued

Ofgem issues ROCs monthly in respect of a station's "RO eligible renewable output" (Art. 28). ROCs are issued no earlier than the second month after generation. The number of ROCs per MWh depends on the technology band (Schedule 5) and the vintage of the generating capacity (pre-2013, 2013/14, 2014/15, 2015/16, or post-2016).

ROCs are legally issued at the point their particulars are entered in the ROC Register maintained by Ofgem (Art. 93). Only the registered holder may produce a ROC to discharge the obligation.

Banding

Schedule 5 sets the MWh per ROC for each technology. A lower number means more ROCs per MWh (higher support). Key current bands (post-2016 capacity):

Stations accredited before specific dates may receive higher legacy bands for their original capacity (Arts. 37-40).

Maximum eligibility

ROCs are available for a maximum of 20 years from accreditation (or capacity addition), with a hard stop at 31 March 2037 for most stations. Pre-June 2008 stations have an earlier hard stop of 31 March 2027 for original capacity (Art. 44).

Buy-out and recycling

The buy-out price

Suppliers who cannot or choose not to present sufficient ROCs may instead pay the buy-out price per ROC shortfall (Art. 67). The base was GBP 44.33 for 2016/17, indexed annually by the December-to-December change in the Retail Prices Index.

Recycling

After deducting Ofgem's administration costs (paid to the Consolidated Fund) and the NI authority's share, the remainder of the buy-out fund is distributed to all UK suppliers who presented ROCs, in proportion to the number of ROCs they presented (Art. 71). This "recycle value" makes the total value of a ROC = buy-out price + recycle payment. The 10% headroom in Calculation B ensures the buy-out fund always contains money to recycle, even when renewable generation broadly meets the target.

Late payments

Suppliers who fail to comply by 1 September have a late payment period to 31 October. Interest accrues daily at the Bank of England base rate plus 5 percentage points (Art. 68). Ofgem may not impose enforcement penalties during the late payment period.

Mutualisation

When a supplier defaults (fails to present ROCs or pay the buy-out), the shortfall reduces the amount available for recycling to compliant suppliers. The mutualisation mechanism socialises this risk (Arts. 72-77).

A shortfall becomes a "relevant shortfall" triggering mutualisation only if it equals or exceeds 1% of (total obligation x buy-out price), rounded to nearest GBP 100,000 (Art. 72(4), inserted by SI 2021/415).

The mutualisation sum (capped at GBP 267 million in 2015/16 terms, indexed by RPI) is collected from relevant suppliers in four quarterly instalments and paid to compliant suppliers on four dates (Arts. 73-77). Former licensees who leave the market remain bound (Art. 74(6)).

Anti-double-subsidy provisions

The RO contains explicit exclusions preventing generators from receiving both ROCs and other support:

• Capacity Market: combustion units with capacity agreements require a transfer notice to transition to ROCs; ROCs only for pre-notice electricity (Art. 48)
• Contracts for Difference: absolute exclusion for CfD/investment contract electricity (Art. 49); biomass conversion stations require a CFD transfer notice (Art. 50)
• Feed-in Tariff: no ROCs for FIT-eligible microgenerators or FIT-receiving stations, unless FIT unavailable due to capacity size (Art. 51)

Biomass conversion ROC cap (Schedule 6)

Inserted by SI 2018/896, Schedule 6 caps the number of ROCs that may be issued to large coal-to-biomass conversion stations (principally targeting Drax-type units). Each "capped combustion unit" of a relevant fossil fuel station is limited to 125,000 ROCs per obligation period.

Combustion units that converted before 12 December 2014 ("exempt combustion units") are not subject to the cap, provided they do not generate more than 15% of their energy from fossil fuel in any 6-month period (Sch. 6 para. 2(3)).

Sustainability requirements

Bioliquid (Schedule 1, Art. 61)

Bioliquid must meet greenhouse gas criteria (emissions lower than the fossil fuel comparator by at least the "relevant percentage": 50% for pre-October 2015 installations, 60% for later installations from 2018) and land criteria (not sourced from protected areas including primary forests, peatland, or highly biodiverse grassland). Annual independent sustainability audits are required (Art. 83, ISAE 3000 standard).

Solid and gaseous biomass (Schedule 2, Art. 63)

Stations of 1 MW or above must meet: - GHG target: tightening from 79.2 g/MJ (pre-2020) to 50 g/MJ (from April 2025) - GHG ceiling: 72.2 g/MJ (from April 2025), allowing monthly variation if the annual average meets the target - Land criteria: woody biomass must be at least 70% from a "sustainable source" (managed forest per Forest Europe criteria or equivalent)

Stations below 1 MW are exempt from sustainability requirements. Annual independent sustainability audits are required for stations at or above 1 MW (Art. 84, ISAE 3000 standard).

Reporting

Biomass generators must provide detailed information to Ofgem by 30 June following each obligation period: fuel composition, origin, mass, GHG emissions, forest management practices (Art. 82). Non-compliance results in postponed ROC issuance.

Other exclusions (Part 7)

• No ROCs for stations in Scotland (Art. 46), which is covered by the Scottish RO
• No ROCs for large hydro >20 MW commissioned before April 2002 (Art. 54)
• No ROCs for peat (Art. 56)
• No ROCs for stations commissioned before January 1990 (except with fossil/renewable mix) (Art. 55)
• Landfill gas ROCs restricted to microgenerators, pre-2013 capacity, closed landfill gas, or heat recovery (Art. 57)
• SRF ROCs only as biomass or in qualifying CHP (Art. 59)

Defined terms

See the full defined terms register in the source file: ~/knowledge/sources/ofgem/schemes/ro-order.md

Key terms: "obligation period" (1 April to 31 March, 2016/17 to 2036/37); "buy-out price" (GBP 44.33 base, RPI-indexed); "microgenerator" (DNC <=50 kW); "relevant electricity" (E&W supply excl. EII); "ROC" (certificate under this Order or 2009 Order); "UK ROC" (ROC, Scottish ROC, or NI certificate).

Cross-references

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