The government wants their extensive plans paid for by private investment (currently estimated at GBP 100 billion +), incentivised by an extension of the Renewables Obligation subsidy mechanism until 2037. Under the Utilities Act 2000 the government has the power to issue a Renewable Obligation Order requiring electricity suppliers to supply a certain proportion of their energy from renewable sources. To prove they have got their energy from renewable sources they have to buy Renewable Obligation Certificates (ROCs), which are issued to generators of renewable energy, alongside any renewable energy they source. The ROCs represent approximately GBP 35 per MWh (actual price March 2009: GBP 35.76), so a wind farm operator can sells its MWh for around BP 65 with the accompanying ROC compared with a coal fired power station selling its MWh at around GBP 30 – a significant incentive. Industry watchdog Ofgem determines the value of ROCs on an annual basis.
In 2009 onshore wind accounted for 33% of the total number of ROCs issues and offshore wind only 8%. To boost the offshore industry, the government allowed multiple ROCs per MWh for offshore projects reaching financial close in the 2009/10 and 2010/11 financial years.
In Scotland, a similar system runs, called the Renewables (Scotland) Obligation
The 2010 Finance Bill upholds the value of offshore electricity at one ROCs (Renewable Obligation Certificates) per megawatt-hour for accredited onshore wind farms and two ROCs for offshore wind farms until 2014. For the 2010/2011 financial year the buyout price for ROCs was GBP 36.00. The government also awarded GBP 50 million of financial aid to offshore wind turbine manufacturing and equipment testing plants.
It is estimated that suppliers in the Scotland, England and Wales will need 0.124 ROCs per MWh to meet their renewable obligations and 0.055 ROCs per MWh in Northern Ireland.
Starting in April 2010 feed-in tariffs were available for households and local authorities that want to produce their own renewable energy electricity. The tariffs range from 34.5 pence per kWh for capacities below 1.5 kW to 4.5 pence per kWh for capacities between 1.5 and 5 MW for twenty years and will keep pace with installation. It is estimated that 2% of the UK’s electricity demand will be met by small scale renewables by 2020 and will be eligible for these feed-in tariffs.