United regulations in the European Union require all suppliers

United Kingdom Renewable Obligations
(RO)

 

Currently, Fuel Mix Disclosure
regulations in the European Union require all suppliers to disclose Greenhouse
Gas (GHG) emissions linked to their power supply. In order to comply with such
regulation, European countries use Guarantees of Origin (GOs) to demonstrate
where each MWh of electricity has been originated from. Once the grid operator receives
the GOs, it removes all claimed generation from identified sources from the
overall national electricity GHG emission factor, which results in a ‘residual’
energy mix GHG emissions factor. In addition to this use, GOs are also of use
for a voluntary market eager to produce more environmentally friendly products
or services. (World Resources Institute,
2015)

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In addition to GOs, since 2002 the
United Kingdom (UK) also uses Renewable Obligation Certificates (ROCs), which
serve as a means to ensure obligated entities with a Renewable Obligation (RO) to
count with an additional long-term (e.g. 20 years) fix cash-inflow per unit of
renewable electricity output. The objective of the scheme was to get an increasing
participation of renewable energy sources in the national electricity matrix. Under
this scheme, a ROC serves as a proof that a certain amount of electricity has
been generated from a renewable source, therefore, the renewable energy
generator has two sources of income, first from the sale of electricity to the
wholesale market and an additional one from the sale of ROCs. Originally, a ROC
was equivalent to one megawatt hour (MWh) of eligible renewable output;
however, since April 2009, the RO has been banded to provide a differentiated
support to distinct renewable technologies, factoring in technology-related
costs and market readiness. Additionally, as of 2010, feed-in tariffs (FITs) have
served 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 for
Difference (CfDs) for renewables. The CfDs are a reverse auction system designed
to provide project investors with certainty over a low carbon electricity
generation potential investment, allowing to fix prices on electricity output
and, as a consequence, to reduce risks linked to variations in energy prices.

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