It seems that the insidious effect of the Renewables Obligation Certificate knows no bounds!
For those who aren’t familiar with the way in which Renewables Obligation Certificates (ROC’s) are operated, I would urge you to first read this post:-
Wind turbines not up to strong winds
Prompted by my innate interest in the subject of our national energy strategy, and by a recent question by Wanlock Dod which had required me to revisit certain Ofgem and DECC web pages, I found myself reading yet another energy related document.
That document was "THE RENEWABLES OBLIGATION BUY-OUT FUND (2010-2011)":-
http://www.ofgem.gov.uk/Sustainabili...Oct%202011.pdf
and the sentence which piqued my curiosity was half way down page 1:-
QUOTE “The total values of the buy-out funds (after removal of costs and accrual of interest) due to be redistributed were £331,800,438 for England and Wales, £22,611,671 for Scotland and £3,207,729 for Northern Ireland”UNQUOTE.
What exactly was this (annual) sum of ~£357million, and who exactly was it going to be distributed to?
The stated sum, is the amount of money (minus Ofgem’s costs and accruals of interest), paid to Ofgem as “unfulfilled ROC” penalties by those electricity generating companies who use fossil fuel.
This “Buy Out Fund” is, apparently, redistributed (i.e. given to) on a pro-rata basis, those electricity producing companies who generate their electricity by use of renewables. (ie the wind farms etc.).
So, not only do the major wind farm entrepreneurs get the very substantial ROC subsidies by selling their excess ROC’s (as explained in the linked post above), but they also get this further direct payment from Ofgem. – This additional payment alone, amounting, as stated in the Ofgem document, to £14.32 for each ROC presented by that company. (The pro-rata proportions to the companies concerned are shown in the table on the Ofgem document).
Putting this into perspective:-
Offshore wind attracts 2 ROC’s per Mw/h generated.
The windfarm operator must present ROC’s for 11% (year 2011) of his generated output.
Effectively leaving him with ~89% of his ROC’s that can be sold on open market. (slight difference being due to the electricity actually used by the plant itself)
Each ROC has a government stipulated buy-out price of £36.99 (year 2011).
Thus, for every MW/h of electricity generated over the 11%, the wind farm gets £73.98 by selling the excess ROC’s.
On top of that, via the above described buy-out fund redistribution, for every MW/h generated within the 11% of his total, he also gets a free gratis payment of £28.64. – (i.e. 2 ROC’s presented per MW/h generated, entitles them to 2 x £14.32 from the fund).
I was previously well aware of the fact that ROC’s were a major source of indirect subsidy to the Renewables generating industry, but was completely unaware that this (annual) fund of hundreds of millions of pounds paid as penalty moneys by the fossil fuel/nuclear generating industries was actually redistributed to the renewables generators as well.
And – don’t forget, they are selling the electricity generated to their customers at market prices too!!
It’s no wonder there is a big interest in offshore wind – and it certainly isn’t because of its efficacy as a generating method!!
Win-win for the wind farm entrepreneurs – Lose-lose for Britain’s electricity customers.
As an aside, DECC (Department of Energy and Climate Change) estimate, (in the May 2011 Energy Review), that the total annual worth of the ROC subsidy scheme to renewables energy generating companies in the UK is approximately £1.75billion (year 2011-2012) rising to approximately £3.25billion by year 2014-2015.
They don't forecast further than year 2014-2015. (But the ROC scheme is in place until year 2037 so your guess is as good as mine as to what the annual worth will be by then).
Now - where can I buy a lot of shares in a windfarm!!
Regards,
Mike.
Linear Mode
