The European Directive on the promotion of electricity produced from renewable energy sources entered into force in September 2001.  The Directive aims to increase the total Community share of electricity generated from renewable energy sources to 22% by 2010.  Member States have been allocated national indicative targets and many have translated these targets into national policy.  A number of Member States have and continue to opt to support the domestic growth of renewable energy by adopting green certificate schemes.

Natsource is active in all Green Certificate markets in Europe including the UK Renewables Obligation Certificate (ROC) Scheme and Levy Exemption Certificate (LECs), Guarantees of Origin and Swedish Green Certificate (Elcertifikat) Scheme.

UK Renewables Obligation Certificates (ROCs)

The Renewables Obligation, which entered into force April 1, 2002, requires electricity suppliers to provide a specified percentage of their sales from renewable energy sources.  The first period which set the target at 3%, which is equivalent to approximately 9.4TWh ended on March 31, 2003.  The second period, which included a target of 4.3%, equivalent to an estimated 13.5TWh, ended on March 31, 2005.  The target for the third period will be 4.9%, equivalent to an estimated 15.6 TWh.  The target will reach 10.4% in 2010/11. 

Suppliers demonstrate compliance with their obligation by retiring ROCs or paying the penalty of £30 per MWh (indexed annually).  A ROC is created with every MWh of output from an eligible renewable energy facility and can be traded separately from the underlying physical power.  One quarter or 25% of a supplier’s obligation can be achieved through the submission of ROCs generated in the previous period.

Suppliers are required to demonstrate compliance with the target by October of any given year and pay the penalty for any shortfall.  The penalty payments are pooled together to form the Buyout Fund. These funds are recycled back to suppliers in a proportionate basis for every ROC, which they retired for compliance.

The ROC Market  

As the market is currently substantially short, and is likely to remain so for the coming years, prices for stand-alone ROCs generated in the first three Obligation years are priced well above the buyout penalty.  ROCs can be traded on a stand-alone basis or in bundled transactions together with the physical power, Levy Exemption Certificates and embedded grid benefits.

To date, majority of stand-alone trades of first period ROCs have been in the range of £45 - £48.  The vast majority of renewable energy developers has and continues to opt to sell their ROCs in forward streams in bundled transactions to secure financing.  Due to the many variables affecting pricing of renewable energy in the UK, there are numerous ways such transactions may be structured in order to maximise returns while hedging risk.

Natsource has arranged a significant number of both stand-alone and bundled transactions on a variety of terms covering all the main technologies, in England, Wales and Scotland, out until 2010.  We have structured and negotiated transactions for both existing and future build projects, using mixtures of flat pricing per MWh and percentage sharing of generated attributes.

Contact: 
Tel. + 44 (0) 20 7827 2942
E-mail. fsantokie@natsource.com