PLEASE NOTE: Information in this article is correct at the time of publication, please contact DFA Law for current advice on older articles.
Landowners looking to let a field for solar may be interested in understanding how renewable energy developers generate income. They will usually have two income streams: income from the sale of the electricity generated, and a subsidy paid by the licensed electricity suppliers (eg NPower).
A producer of green energy will invariably sell the power generated to a licensed electricity supplier via the national grid. Alternatively, the green producer may sell its power to a heavy user of electricity located nearby.
In addition, the green energy producer will take advantage of the government’s Renewables Obligation system of industry subsidies. Feed-in-Tariffs are no longer available for large-scale ground based installations.
The Renewables Obligation is legislation which compels licensed electricity suppliers to obtain a proportion of electricity from renewable sources. Licensed electricity suppliers that do not generate sufficient green energy of their own are obliged to buy Renewables Obligation Certificates (ROCs) from green generators, and therefore there exists a market in ROCs.
The regulator, the Office for Gas & Electricity Markets (Ofgem), issues ROCs to producers of green energy. Different types of generator receive ROCs at different rates. Large-scale ground mounted solar PV is currently entitled to receive 1.6 ROCs for every megawatt hour of power produced. This will decrease in April 2014 to 1.4 ROCs.
Once issued, ROCs can be sold on the open market, sometimes through intermediaries.