More than £40mn to be recovered from consumers due to failed suppliers Renewable Obligations

As generators are starting to receive their final Renewables Obligation Certificates (Rocs) for generation during the compliance period (CP)17 (2018-19) of the Renewables Obligation (RO), eyes will soon be turning to suppliers regarding the upcoming compliance deadline this summer.

Latest calculations from Cornwall Insight’s Long-term Roc Market Forecast, predict that due to 11 suppliers exiting the market in CP17, there will be a potential shortfall in the buy-out fund, well over £40mn. With mutualisation set to be triggered, Cornwall Insight’s forecasts predict that this shortfall will add around 15-20p per MWh to the customer bill. The below graph illustrates the RO payments of the exited suppliers in this current CP.

A graph showing estimated supply volumes and RO payments due from exited suppliers, CP17

Tim Dixon Wholesale Team Lead at Cornwall Insight, said:

“RO compliance hit the headlines last year when 14 suppliers failed to meet their obligation for CP16 (2017-18). In CP16 the shortfall in payments totalled £58.6mn. This triggered mutualisation – a mechanism to recover a shortfall in RO buy-out payments above a certain threshold – and means that the rest of the supply market now needs to recover the money.

“This year it is almost like déjà vu, with a total of 11 suppliers exiting the market with volumes in CP17 and once again it is predicted we will see a shortfall of more than £40mn, assuming the debts remain unfulfilled and of course there are no further exits.

“While this is smaller than the shortfall seen last year, mutualisation looks likely to be triggered once again, with suppliers facing the additional costs to cover the non-payments from suppliers who failed to meet the RO.”