British Industrial Competitiveness Scheme (BICS): changes to the Renewables Obligation (Scotland) Order 2009

3. The Renewables Obligation Exemption

This section sets out and seeks views on the proposed approach to implement a Renewables Obligation Scotland (ROS) exemption for BICS eligible businesses. It sets out the proposed approach to modifying the scope and methodology for setting the obligation level to account for the proportion of electricity supplied to BICS eligible businesses. It also sets out proposed arrangements for publishing the final obligation level for the 2027 to 2028 obligation period.

How the Renewables Obligation works

The Renewables Obligation schemes have incentivised UK renewable electricity generation since 2002 through a system of tradable green certificates called Renewables Obligation Certificates (ROCs).

The schemes place an annual obligation on electricity suppliers to present to Ofgem (the scheme’s administrator) a specified number of ROCs per megawatt hour of electricity supplied to their customers during each obligation period (which runs from 1 April to 31 March). This is the “obligation level”.

Ofgem issues ROCs to accredited generators based on the amount of renewable electricity they produce, the type of technology used, and their year of accreditation. Generators can sell these ROCs to electricity suppliers or traders, either with the electricity generated or separately, as tradable commodities. The price of a ROC is negotiated between the generator and the buyer.

Electricity suppliers then submit ROCs to Ofgem to meet their renewables obligation. A supplier may, instead of presenting ROCs to Ofgem, discharge its renewable obligation by making a payment to Ofgem. Ofgem then distributes the money collected in this fund back to electricity suppliers who did submit ROCs, in proportion to the number they presented, after deducting Ofgem’s administration costs.

The RO is covered by three separate but complementary schemes in the UK:

• The Renewables Obligation (RO), for England and Wales, was introduced in 2002.
• The Renewables Obligation Scotland (ROS) for Scotland, was introduced in 2002.
• The Northern Ireland Renewables Obligation (NIRO) was introduced in 2005.

The Scottish Government is responsible for the legislation governing the ROS which this consultation covers. The UK Government and the Northern Ireland Executive are responsible for the legislation of their respective schemes. Ofgem administers all RO schemes across the UK.