United Kingdom Renewable Obligations(RO) Currently, Fuel Mix Disclosureregulations in the European Union require all suppliers to disclose GreenhouseGas (GHG) emissions linked to their power supply. In order to comply with suchregulation, European countries use Guarantees of Origin (GOs) to demonstratewhere each MWh of electricity has been originated from. Once the grid operator receivesthe GOs, it removes all claimed generation from identified sources from theoverall national electricity GHG emission factor, which results in a ‘residual’energy mix GHG emissions factor. In addition to this use, GOs are also of usefor a voluntary market eager to produce more environmentally friendly productsor services. (World Resources Institute, 2015) In addition to GOs, since 2002 theUnited Kingdom (UK) also uses Renewable Obligation Certificates (ROCs), whichserve as a means to ensure obligated entities with a Renewable Obligation (RO) tocount with an additional long-term (e.g. 20 years) fix cash-inflow per unit ofrenewable electricity output.
The objective of the scheme was to get an increasingparticipation of renewable energy sources in the national electricity matrix. Underthis scheme, a ROC serves as a proof that a certain amount of electricity hasbeen generated from a renewable source, therefore, the renewable energygenerator has two sources of income, first from the sale of electricity to thewholesale market and an additional one from the sale of ROCs. Originally, a ROCwas equivalent to one megawatt hour (MWh) of eligible renewable output;however, since April 2009, the RO has been banded to provide a differentiatedsupport to distinct renewable technologies, factoring in technology-relatedcosts and market readiness. Additionally, as of 2010, feed-in tariffs (FITs) haveserved as an incentive for projects of 5 MW of installed capacity or smaller.
Currently,the RO is phasing out to be replaced by a new instrument, the Contract forDifference (CfDs) for renewables. The CfDs are a reverse auction system designedto provide project investors with certainty over a low carbon electricitygeneration potential investment, allowing to fix prices on electricity outputand, as a consequence, to reduce risks linked to variations in energy prices.