Renewables Obligation

The Renewables Obligation (RO) began in Great Britain in 2002. Ofgem issues Renewables Obligation Certificates (ROCs) to accredited renewable generators for the Elec they generate, and the generators sell them to suppliers. In England and Wales the Renewables Obligation Order 2015 puts the obligation on every Elec supplier. Scotland has its own order, and Northern Ireland runs a separate scheme.

Each obligation year runs from 1 April to 31 March. The government sets an obligation level in ROCs per MWh supplied, and Ofgem publishes a buy-out price in £ per ROC. A supplier meets its obligation by presenting ROCs, by paying the buy-out price for any shortfall, or by a mix of the two. Ofgem takes its running costs from the buy-out fund and pays the rest back to suppliers in proportion to the ROCs each presented.

Obligation level times buy-out price gives the cost per MWh. What each supplier recovers differs, because suppliers pay different prices for ROCs and get different shares back from the fund.

Key facts:

• Closed to new generating capacity from 1 April 2017
• Stations earn ROCs for up to 20 years, and the last obligation year ends on 31 March 2037
• 2026-27: buy-out price £69.34 per ROC and obligation level 0.472 ROCs/MWh in England, Wales and Scotland
• The buy-out price rises with CPI from 1 April 2026, replacing RPI
• From 2026-27 to 2028-29 the government funds 75.0% of the RO cost of domestic supply, under a direction made after Budget 2025; non-domestic supply is not covered

EnergyCode prices the RO in the Pricing Engine as obligation level times buy-out price per MWh supplied, with the 75.0% government share taken off domestic supply. It does not validate RO charges on invoices, because each supplier's recovery rate is different.