Between a ROC and a Hard Place

Between a ROC and a Hard Place
Renewable Obligation Certificates (ROCs) have been used by both the Scottish and UK Governments as a way to incentivise traditional energy suppliers to generate a percentage of their supply from renewable sources. The rate of ROCs awarded varies depending on the method of generating the renewable power. There has been much discussion in the industry on how these rates were to change and concerns that a lack of clarity was damaging investment and development.

On 13 September the Scottish Government published its response to the Consultation on the Renewables Obligation (Scotland) banding review, which is largely in line with the recent banding review in England & Wales. This article deals with the major incoming changes in Scotland. The response in full can be found here

Wood-fuelled Biomass
Eligible biomass stations will continue to receive support at a rate of 1.5 ROCs/MWh until 31 March 2016, but will then fall to 1.4 ROCs/MWh from 1 April 2016. A further brief consultation is to be carried out to determine whether eligibility for dedicated (wood) biomass is to be capped at a 10MW capacity ceiling. This is in line with UK Government amendments.

Onshore Wind
Onshore wind developments currently receive support at a rate of 1 ROC/MWh, however this is due to drop to 0.9 ROC/MWh from 1 April 2013 for all onshore wind developments. The UK Government position is for the same revision, and both governments have proposed a closure of the band to new projects under 5MW which shall be the subject of a further consultation.

Following the UK review, potential investors were disappointed to learn that the RO level for onshore wind was only guaranteed until 2014 and may be decreased further if a call for evidence shows significant change in industry costs. It was hoped that Scotland would issue a more definite rate which would be fixed until 2017, particularly as the Scottish Government criticised the UK Government saying that the industry needed certainty and indicated that the Scottish Government would keep the band rate for the 4 year period. However the Scottish Government’s response in respect of the onshore banding level contains the caveat that the outcome of the latest call for evidence by the UK Government “can and will be taken into account by the Scottish Government”. So there appears to be just as much uncertainty on both sides of the border for this technology.

Offshore Wind
This field is one of the winners from this round of updates. The existing plan was for a rate of 2 ROCs/MWh in 2013/2014, falling to 1.5 ROCs from 2014-2015 onwards. The new proposals see a rate of 2 ROCs/MWh from 2013-2015, 1.9 ROCs/MWh in 2015-2016 and 1.8 in 2016-2017. This mirrors the position in the rest of the UK.

The Scottish Government also intends to consult upon the introduction of new separate banding for innovative offshore wind generation (including floating wind farms) in deep waters off the Scottish coast. The UK Government banding review rejected similar proposals.

Hydro
In a deviation from the UK Government position of revising the ROC rate down to 0.7 ROC/MWh for hydro power, the Scottish Government has elected to leave the current rate unchanged at 1 ROC/MWh.

Marine Renewables
This sector has also received a boost following the planned changes. The current rate of 2 ROCs/MWh is to be increased to 5 ROCs/MWh for tidal stream in Scottish waters. There is a proposal to cap individual stations at 30 MW, above which the level of support provided will be 2 ROCs/MWh. This is in line with UK proposals.

CHP Stations
The revised rate of support for CHP stations depends on the particular type of station. Subject to additional consultation, the Scottish Government intends to revise the rate of ROCs down for each of them. Full details can be found using the hyperlink at the top of this article.

Solar PV
Support levels for solar PV will be discussed in the additional consultation to be issued by the Scottish Government. This will also cover the exclusion from support under the ROS of new solar PV, anaerobic digestion, hydro and onshore wind installations at or below 5MW, which are currently eligible for support under the Feed-In Tariff scheme as well as the ROS.

Grace Periods
The introduction of grace periods will mirror the position in the rest of the UK – this allows generators, in a band which was due to be reduced, to retain the existing banding support where the generator suffered from either delays to grid connection or delays to necessary radar upgrades. These will apply for six months from April 1 2013; however support for eligible projects will begin from the date of accreditation during the grace period.