The Renewables Obligation (Scotland) Order 2007

Explanatory Note

(This note is not part of the Order)

This Order is made under section 32 of the Electricity Act 1989 and imposes an obligation (“the renewables obligation”) on all electricity suppliers, which are licensed under that Act and which supply electricity in Scotland, to supply to customers in Great Britain a specified amount of electricity generated by using renewable sources. As alternatives, in respect of all or part of an electricity supplier’s renewables obligation, an electricity supplier is permitted to provide evidence that other licensed electricity suppliers have supplied electricity generated using renewable sources instead of it, or to make a payment to the Gas and Electricity Markets Authority (“the Authority”). Renewable sources include sources of energy such as wind, water, solar and biomass.

The Order revokes and replaces, with amendments, the Renewables Obligation (Scotland) Order 2006 (“the 2006 Order”). The main differences between this Order and the 2006 Order are the introduction of minimum wave and tidal requirements as part of the renewables obligation; and changes enabling small and micro generators to amalgamate their output and/or appoint agents to act on their behalf.

Article 2 contains the interpretation provisions for the Order.

Article 3 imposes the renewables obligation on electricity suppliers. The renewables obligation requires the electricity supplier to produce evidence of the supply of electricity generated from renewable sources to the Authority. The evidence required is certificates issued by the Authority. Those certificates issued under this Order are referred to as “SROCs”. Alternatively the electricity supplier may produce certificates issued under the corresponding Order made by the Secretary of State for Trade and Industry: the Renewables Obligation Order 2006. Part 4 of the Order (articles 11 to 15 described below) provides alternative means of discharging the obligation.

Articles 4 and 5 and Schedule 1 provide for how the amount of an electricity supplier’s renewables obligation is to be determined. This includes a specified minimum amount which must be generated from wave and tidal generating stations located in Scottish waters or the Scottish area of the Renewable Energy Zone.

Articles 6 to 10 determine what types of electricity generated from renewable sources are eligible to satisfy an electricity supplier’s renewables obligation.

Article 11 provides that, instead of producing certificates to the Authority, an electricity supplier may discharge (in whole or part) its renewables obligation by making a payment to the Authority.

Article 12 provides for suppliers to discharge their renewables obligation by tendering eligible certificates, issued under the Northern Ireland Renewables Obligation orders (“NIROCs”) to the Authority. Schedule 3 sets out the conditions governing NIROC eligibility.

Articles 13 and 14 provide for an electricity supplier to discharge its renewables obligation by producing to the Authority certificates certifying the matters in section 32B(2A), (2AA), 32B(2AB) or (2AC) of the Electricity Act 1989 (including electricity supplied to customers in Northern Ireland, electricity supplied by two or more generating stations between them, and electricity consumed by the operators of the generating station).

Articles 16 to 23 and Schedule 2 provide for the issue of SROCs by the Authority and the maintenance by it of a register of SROCs. Article 17 provides for the operators of micro generating stations to appoint agents to receive SROCs on their behalf.

Article 24 provides for the revocation of SROCs in specified circumstances.

Article 25 contains special arrangements enabling generating stations with a declared net capacity of 50 kilowatts or less to be able to claim SROCs on an annual rather than monthly basis.

Article 26 sets out the formula to be applied in respect of making allocations of payments to the wave and tidal buy-out funds

Article 27 provides how the payments made to the Authority by electricity suppliers under article 11 (payments as alternative means of discharging renewables obligation) are to be divided amongst those electricity suppliers subject to the renewables obligation. Articles 28 and 29 provide for allocation of the wave and tidal buy-out funds to designated suppliers who produce certificates in compliance with their renewables obligations which meet the minimum wave or tidal requirement during the obligation period and further provides for refund by the Authority of monies paid into the buy-out if no designated suppliers produce any such certificate.

Article 30 provides for an electricity supplier to be treated as having discharged its renewables obligation if it makes a late payment in accordance with that article. The late payment must be made during a specified period and is subject to a surcharge which rises on a daily basis. If the supplier only makes a partial late payment the remaining part of its renewables obligation remains outstanding and the supplier is still in default of its renewables obligation.

Articles 31 to 33 provide for mutualisation as set out in details of how the process will work; such as how a shortfall in the buy out fund will be calculated and which shortfalls are recoverable via mutualisation. Specifically, where the shortfall is less than the sum set out in Schedule 4 for that obligation period, mutualisation is not triggered; when the shortfall is equal to or greater than the sum set out in Schedule 4 and does not exceed £20,640,000, the whole shortfall is recovered via mutualisation; and when the shortfall is over £20,640,000, only the first £20,640,000 of the shortfall is recovered.

The payments required by electricity suppliers in accordance with the mutualisation provisions are made in quarterly instalments. For example, for a shortfall in the obligation period 2007/2008, the instalments are required before the following dates: 1st September 2009, 1st December 2009, 1st March 2010 and 1st June 2010.

Article 35 provides for the Authority to obtain information to enable it to carry out its functions under the Order.

Article 36 provides for the exchange of information between the Authority and the Northern Ireland Authority relating to NIROCs produced to the Authority under article 12 and SROCs produced to the Northern Ireland Authority under the Northern Ireland Renewables Obligation orders.

Article 37 makes provision relating to the functions of the Authority under the Order.

Article 38 provides for the preliminary accreditation and accreditation of generating stations. In order to be eligible to claim SROCs in respect of electricity generated from eligible renewable sources, a generating station must obtain accreditation from the Authority.

Article 39 revokes the 2006 Order and also provides for savings provisions in respect of the obligations of each electricity supplier to produce evidence and other information in respect of the renewables obligation, or to make payments to the Authority, and to furnish information to the DTI in respect of periods prior to the coming into force of the Order.

A Regulatory Impact Assessment is available and can be obtained from the Energy Policy Unit, the Scottish Executive Enterprise and Lifelong Learning Department, 5 Cadogan Street, Glasgow, G2 6AT.

This Order re enacts provisions of the 2006 Order which gave effect to Article 3.1 of the European Directive on the promotion of electricity produced from renewable energy sources in the internal market (Directive 2001/77/EC, O.J. L 283, 27.10.01, p.33).