ROCs – why are they traded?
Before we delve in to establishing why ROCs are traded, we must understand what ROCs actually are and how they work.
What is a Renewable Obligation Certificate (ROC)?
- Renewable Obligation Certificates are green certificates that are issued to operators of accredited renewable generating stations for every MWh of eligible electricity produced.
- Operators of an accredited renewable energy generating station can sell their ROCs independently of their electricity.
- It is compulsory for suppliers to demonstrate they have met their renewables obligation. Without ROCs suppliers must pay a fine levied for non-compliance.
There is a Renewable Obligation placed on suppliers to prove that a certain percentage of their total supply comes from a renewable source. A supplier's obligation is calculated using the following formula; supplier obligation (ROCs) = total electricity supplied (MWh) x obligation level (ROCs/MWh).
Suppliers who do not meet their obligation must pay a penalty, known as the 'buy-out price'.
Suppliers buy ROCs to avoid the fine levied for non-compliance. Ultimately the incentive is for suppliers to buy ROCs at a discounted value of the Buy Out price. The Buy Out Price is set by Ofgem and this year it is £47.22.
Money received by Ofgem from the Buy Out price and late payment funds is re-distributed on a pro-rata basis to suppliers who presented ROCs.
ROCs are essentially a virtual green certificate which are purchased by the supplier.
The owner of the generating station receives ROCs from Ofgem. The amount of ROCs received depends on the amount of eligible electricity generated. After this, the ROCs are then sold to a supplier or suppliers, who submit the ROCs back to Ofgem in order to meet their obligation. ROCs can be sold independently or by a cooperative, i.e. Action Renewables.
We have continually exceeded the market alternative for ROC trading prices. If you’d be interested in trading your ROCs with us, get in touch with our team on 028 9072 7760.