Members' Sustainability Obligations
Members of the Green Energy Supply Certification Scheme, like all other UK electricity suppliers, have to comply with certain licence conditions, including a requirement to purchase a minimum level of electricity from renewable sources. The information on this page relates to all suppliers; the exact amount spent on environmental programmes by your particular supplier may vary from the figures shown.
These sustainability conditions may be summarised as:
- Suppliers have a Renewables Obligation (RO) under which they have to buy Renewable Obligation Certificates to fulfil their annual obligations and/or pay a fee to Ofgem;
- The Government's ongoing aim of the Renewable Obligation is to encourage an increased amount of electricity to be generated from renewable sources such as the sun, wind, or biomass;
- According to Ofgem, the average amount that a domestic customer on a standard electricity tariff are already contributing to renewable energy as a result of the Renewable Obligation is £12 a year, based on a typical consumption of 3,300kWh;
- In addition suppliers have obligations to invest in energy efficiency under the Carbon Emissions Reduction Target (CERT) through measures such as low energy appliances or loft or cavity wall insulation;
- The Government's ongoing aim of the CERT is to encourage an increased amount of energy efficiency by domestic customers;
- The average amount that domestic customers on standard gas and electricity tariff are already contributing towards the supplier's CERT obligations is £45 a year, based on typical dual fuel customers using 20,500kWh of gas and 3,300kWh of electricity;
- Non-domestic tariffs above a certain threshold are subject to the Climate Change Levy (CCL) although there are certain levy exemption regulations; and
- For non-domestic tariffs, customers generally pay 0.47p/kWh to support renewables through the CCL, unless they are on an exempt tariff. For an enterprise using 20,000kWh of electricity this would cost £94 a year.
The Renewables Obligation, CERT and Climate Change Levy are described in more detail in the three sections below. As the Green Energy Supply Certification Scheme is only available in England, Wales and Scotland, please note that the information given below does not relate to Northern Ireland.
What is the Renewables Obligation?
The Renewables Obligation is the main support scheme for renewable electricity projects in the UK. It places an obligation on UK suppliers of electricity to source an increasing proportion of their electricity from renewable sources.
A Renewables Obligation Certificate (ROC) is a green certificate issued to an accredited generator for eligible renewable electricity generated within the United Kingdom and supplied to customers within the United Kingdom by a licensed electricity supplier. Until March 2009, one ROC was issued for each megawatt hour (MWh) of eligible renewable output generated. Since then, ROCs have been banded, to reflect the reality that some forms of renewable electricity are more expensive or more difficult to generate than others, and to ensure that not all new capacity was placed into a single type of supply.
The Renewables Obligation orders came into effect in England, Wales and Scotland in April 2002 and are subject to regular review. The Orders place an obligation on licensed electricity suppliers to source an increasing proportion of electricity from renewable sources. Suppliers meet their obligations by presenting sufficient Renewables Obligation Certificates (ROCs). Initially set at just 3 percent, the level for 2009-2010 is 9.7 ROCs per 100 MWh and in 2010-2011 is 11.1 ROCs per 100 MWh (which would be equivalent to 11.1 percent if only the most straightforward renewable electricity was supplied).
Where suppliers do not have sufficient ROCs to meet their obligations, they must pay an equivalent amount into a fund, the proceeds of which are paid back on a pro-rated basis to those suppliers that have presented ROCs. In 2010-11 they will have to pay £36.99 for each ROC that they are unable to deliver. This buy-out price is linked to the Retail Prices Index. The Government intends that suppliers will be subject to a renewables obligation until 31 March 2027.
The Renewables Obligation and its Scottish equivalent are designed to incentivise renewable generation into the electricity generation market. These schemes were introduced by the Department of Trade and Industry and the Scottish Executive and are administered by the Gas and Electricity Markets Authority (whose day to day functions are performed by Ofgem).
What is the Carbon Emissions Reduction Target (CERT)?
The Carbon Emissions Reduction Target (CERT) requires all gas and electricity suppliers with at least 50,000 domestic customers to achieve targets for a reduction in carbon emissions generated by the domestic sector. Running from 2008 to 2011, CERT follows on from the Energy Efficiency Commitment (EEC)and was most recently revised in 2009. Under CERT each supplier has an individual target for carbon emissions reduction known as its 'carbon obligation'. The overall carbon emissions reduction target to be achieved collectively by suppliers between 1 April 2008 and 31 March 2011 is 185 million tonnes of carbon dioxide (lifetime).
Although most UK households have benefited from CERT through the provision of free or very low cost compact fluorescent lamps (CFLs), the largest savings have come through support for loft and cavity wall insulation. CERT also supports a number of other measures including real time displays, external wall insulation, low energy appliances and is often accompanied by home energy advice.
Ofgem have procedures in place to assess suppliers’ schemes. Improving energy efficiency will help customers save money from their bills and at the same time lead to a reduction in carbon emissions.
The government has committed to the continuous delivery of carbon savings from the domestic sector using some form of supplier obligation until at least 2020. Under the CERT activity equivalent to at least 40 per cent of the target must be targeted at certain low-income domestic consumers or those who are over 70 years old.
Suppliers have additional obligations under the Community Energy Saving Programme (CESP) to deliver energy saving measures to domestic consumers in specific low income areas of Great Britain using a 'whole house' approach and treating as many properties as possible in defined areas.
What is the Climate Change Levy?
On 1 April 2001, the Government introduced the Climate Change Levy (CCL). It is a charge on non-domestic supply of electricity in the United Kingdom. This is the industrial and commercial supply of taxable commodities for lighting, heating and power by consumers in industry, commerce, agriculture, public administration and other services.
Electricity is currently (with effect from 1 April 2009) subject to the Levy at a rate of £4.70/MWh. There are some exemptions for renewable electricity, good quality combined heat & power (CHP) and electricity produced from coal mine methane.
Accredited stations producing electricity from renewable sources (such as wind, solar and some hydro or biomass) are issued with electronic Renewables Levy Exemption Certificates (rLECs) by Ofgem for each Megawatt hour (MWh) of electricity generated. Renewables LECs are part of the evidence required by HM Revenue & Customs to demonstrate the amount of renewable source electricity supplied to non-domestic customers in the United Kingdom. They are used by electricity suppliers to claim the CCL Exemption on non-domestic supply. Non-domestic supplies accredited under the Green Energy Supply Certification Scheme must have any associated rLECs retired.
Why should I still buy a Green Tariff?
You may wonder why you should buy a green tariff, given that all suppliers have to meet the minimum requirements described on this page. However there are two main reasons why it is a good choice a tariff certified under the Green Supply Scheme:
- As Members have to match all suppliers under certified tariffs with renewable electricity purchases, this creates extra demand for green electricity and will encourage the development of new renewable sources;
- All certified tariffs must also provide an additionality benefit, such as contributing to a Green Fund supporting community renewables initiatives, installing energy efficiency measures beyond those in CERT or CESP, or purchasing carbon offsets to support CO2 reduction projects internationally.