The ROC Mechanism


June 22, 2012

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Let’s just suppose for a moment that Oliver Letwin knows something that we don’t. That is, UK onshore wind will be subsidy free by 2020, and that the forthcoming reduction in renewable obligation certificate’s (ROCs) is likely to be nearer to 25%, rather than the 10% favoured by Ed Davey.

Such a move certainly seems to be the Treasury’s agenda, keen to keep the support of the back-bench Tory right.

Nick Clegg, speaking in Rio, was keen to raise the Lib-Dem voice in the debate, stating that although subsidies weren’t set in stone, early stage support went a long way to developing the appropriate technologies.

The Daily Telegraph’s Benedict Brogan suggested that were ROC support to be removed from onshore wind then the ‘march of turbines’ across the UK landscape would be halted almost immediately.

Perhaps so. Much of the unofficial feedback from the American Wind Energy Association’s annual conference was of a much quieter event than last year, as businesses hedged their bets against the potential for the entire removal of the Production Tax Credit (PTC).

But either way, the future state of the ROC mechanism is something that should be very clear when the UK Energy Bill is finally published.

Whatever the final plan for onshore wind, it should leave little room for speculation or uncertainty. Developers won’t get involved if they are unlikely to be able to sell their projects to secondary investors, particularly if the rewards for taking on the costs of construction are steadily falling.

There are also some questions as to the continuation of the ROC mechanism as the best method for supporting renewables. As an incentive, it’s somewhat complex, something that adds to the misperception that wind energy is an opaque way of investors becoming wealthy at the expense of consumers.

We’ll have to wait until the Autumn for the full detail. And while it’s easy to look over our shoulder and dismiss what’s happening in North America, let’s not forget that these are still uncertain times for UK wind.

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