Feed-in tariff (United Kingdom)
The UK Climate Change Act which is currently passing through parliament (December 2008) includes provision for an instrument which will be called the Feed-in Tarrif. This is are planned to enable small renewable energy producers to export electrical power to their local grid at a predetermined payment rate.
Feed-in tariffs are contracts which smaller energy producers, like Anaerobic Digestion facilities, can make with energy providers in place of the more complex Renewable Obligation Certificates (ROCs) system, which is intended for use by larger organisations.
The Government intends that only small energy producers (5MW or less), will be eligible to use feed-in tariffs. As part of this it is in the process of setting an energy production cap system.
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Industry experts expect that Anaerobic Digestion Plant operators who produce between 50KW and 5MW of power will be eligible for the simpler feed-in tariffs.
These new contract arrangements will encourage uptake of the technology as they should be much simpler to use for smaller producers and it is hoped that they will be an important "boost to the sector".
ROCS
ROCs or Renewable Obligation Certificates, are part of the Renewables Obligation, which in turn is an important part of the UK governments plan to (in common with the rest of the EU nations) to achieve a 20% reduction in carbon emissions from 1990, by the year 2020.
The Renewables Obligation (RO) is the larger twin of the Feed-in Tarrif, and is designed to incentivise the generation of electricity from eligible renewable sources in the United Kingdom. It was introduced in England and Wales and in a different form (as the Renewables Obligation (Scotland)) in Scotland in April 2002 and in Northern Ireland in April 2005.
The RO places an obligation on licensed electricity suppliers in the United Kingdom to source an increasing proportion of electricity from renewable sources. In 2006/07 it was 6.7% (2.6% in Northern Ireland).
This figure was initially set at 3% for the period 2002/03 and under current political commitments will rise to 10.4% by the period 2011-12, and thereafter by 1% annually for the following five years.
Suppliers meet their obligations by presenting Renewables Obligation Certificates (ROCs).
When electricity suppliers do not have sufficient ROCs to cover their obligation, they must make a payment into a buy-out fund. The buy-out price is a fixed price per MWh shortfall and is adjusted in line with the Retail Price Index each year.
The proceeds of the buy-out fund are paid back to suppliers in proportion to how many ROCs they have presented. For example, if they were to submit 5% of the total number of ROCs submitted they would receive 5% of the total funds that defaulting supply companies pay into the buy-out fund.
Obligation periods run for one year, beginning on 1 April and running to March 31st. Supply companies have until the 31 September following the period to submit sufficient ROCs to cover their obligation, or to submit sufficient payment to the buy-out fund to cover the shortfall.
The cost of ROCs is effectively paid by all electricity consumers, since electricity suppliers pass this cost on as a small increase in the tariff for the electricity they sell.
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