Ofgem has revealed the new buyout price for Renewable Obligation Certificates (ROCs) in 2019/20.
The regulator said it will rise from £47.22 currently to £48.78, reflecting a 3.3 per cent increase in the retail price index during 2018.
Ofgem has also raised the mutualisation ceiling for the Renewables Obligation (RO) scheme in line with inflation. It has been set at almost £294 million for England and Wales – a £9.3 million increase on the current level – and £29.4 million for Scotland.
There is no mutualisation process in Northern Ireland.
The RO requires suppliers to buy a certain percentage of the power they sell from renewable sources. Accredited generators receive a set number of ROCs for each megawatt hour they produce. They can then sell these certificates to suppliers.
Suppliers must present enough ROCs to Ofgem each year to demonstrate they have met their yearly obligation and make up any difference with buyout payments.
These payments are first used to cover the administration costs of the scheme, with the rest being returned to suppliers in proportion to the number of ROCs they submitted to Ofgem.
If the outstanding payments following the final deadline exceed a certain threshold known as the relevant shortfall, a process called mutualisation is triggered.
Suppliers that met all or part of their obligation must pay into a mutualisation fund according to their share of the overall obligation for the year in question, taking into account that failed suppliers cannot contribute.
The money collected is then returned to suppliers in proportion with the number of ROCs they presented to Ofgem. Those that have failed to meet their obligation in full are not entitled to receive any payments.
The mutualisation ceiling represents the maximum amount of money that can be redistributed through this process.
Ofgem revealed in October that an “unprecedented” 34 suppliers had failed to meet the 1 September deadline for making buyout payments for 2017/18, and collectively owed nearly £103 million.
The following month the regulator announced a mutualisation process would be triggered for the first time ever after suppliers failed to pay off enough of the deficit to bring it below the relevant shortfall.
The deficit was later revealed to total £58.6 million across the whole of the UK.