UK Government Consults on Transitioning the Renewables Obligation to Fixed Price Certificates

On 31^st July, the Department for Energy Security and Net Zero (DESNZ) launched a call for evidence to gather evidence and views on the case for introducing Fixed Price Certificates into the UK-wide Renewables Obligation schemes. The UK government is proposing to transition the Renewables Obligation (RO) scheme from a system of tradable certificates (ROCs) to a system of fixed price certificates (FPCs) by 2027. This would apply to the RO schemes covering England & Wales, Scotland, and Northern Ireland.

The consultation will close on 09 October 2023.

In a nutshell, the government believes moving to an FPC system will provide greater revenue stability for renewable generators as the value of ROCs is expected to become more volatile when early generators start retiring from the scheme beginning in 2027. The transition may also help reduce the risk of supplier payment default and lower costs to consumers.

Two potential models are outlined in the call for evidence:

• Model 1 involves a central body that would pay generators directly for the FPCs they generate. No trading of FPCs would be allowed under this model. While this provides certainty for generator revenues, it eliminates some of the benefits of being able to trade ROCs.
• Model 2 is similar but would allow generators to continue trading FPCs for a period before final sale to the central body at a fixed price. This aims to maintain the benefits of trading while still providing revenue stability.

For anaerobic digestion (AD) generators who currently rely on ROCs, the move to an FPC system signals a major shift in how the scheme operates. While price volatility may be reduced, there are concerns revenues could be impacted depending on how FPC pricing is determined. The loss of trading flexibility may also have implications for AD operators.

With the consultation closing on October 9th, it is critical for the AD industry to provide feedback to the government based on how these proposed changes could impact their businesses. We strongly encourage all AD operators and developers currently benefitting from the RO scheme to contact our policy team to chat through the impact of these proposals on your plant/s.

Please feel free to contact Wasundara at Wasundara.Doradeniya@adbioresources.org to discuss the consultation and potential industry response. With enough constructive feedback, we can help shape the FPC policy in a way that works for the sector. But we need to act quickly – please get in touch ASAP!

The full call for evidence documentation can be found here.