Renewables Obligation
What is the Renewables Obligation (RO)?
The Renewables Obligation, usually shortened to RO, is a UK government scheme that requires licensed electricity suppliers to source a set proportion of their electricity from renewable generation. Suppliers meet the obligation by buying Renewables Obligation Certificates (ROCs) from accredited generators, and the cost is recovered through electricity unit rates rather than through taxation. Introduced in 2002, it was for years the main support mechanism for large-scale UK renewables. It closed to new generation in 2017 but continues for existing generators until 2037, which is why it still sits within the rates businesses pay today.
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The Renewables Obligation ran from 2002 and was, for most of its life, the main way the UK supported large-scale renewable electricity. It worked through tradeable certificates rather than a grant from taxation, and the cost sat inside supplier charges rather than general tax. Understanding it explains a real slice of what you pay per unit.
What the RO actually is
The Renewables Obligation is a UK government scheme, introduced in 2002, that required licensed electricity suppliers to source a rising share of the power they sold from renewable generation. Instead of paying generators a subsidy straight from taxation, the government put the duty on suppliers and let a certificate market do the heavy lifting. Each supplier had an annual target. Miss it, and they had to pay into a buy-out fund instead.
The cost is not met from taxation. It is recovered from electricity bills, folded into the unit rate that every business and household pays per kWh. That structure, a legal obligation backed by tradeable certificates, is how the RO reshaped the generation mix without ever showing up as a tax.
How the RO works
Each year the government sets an obligation level: a number of certificates a supplier must present for every megawatt-hour (MWh) of electricity it sells. Suppliers meet it in one of two ways. They present Renewables Obligation Certificates, known as ROCs, that they have bought from renewable generators, or they pay a fixed buy-out price per missing certificate into a central fund.
That buy-out fund is then recycled back to the suppliers who did present certificates, which makes the ROCs themselves more valuable and rewards the suppliers who backed renewables. The whole mechanism is administered by the regulator, Ofgem. The practical result for you is simple enough: the more the obligation rose over the years, the more cost worked its way into commercial electricity rates.
ROCs explained
A Renewables Obligation Certificate is issued to an accredited renewable generator for the electricity it produces, then sold on to suppliers who need them for compliance. Different technologies were awarded different numbers of ROCs per MWh, a system called banding, so that more expensive technologies such as offshore wind earned more certificates than well-established ones.
It’s worth not confusing ROCs with REGOs. A REGO simply certifies that a unit of electricity came from a renewable source, which is what sits behind a green tariff. A ROC was a subsidy instrument with real financial value attached. One proves origin; the other moved money toward building new renewable capacity.
What it costs on a bill
Because the RO is bundled into the unit rate, you can’t read it off your bill the way you can the Climate Change Levy or VAT. It’s there, it’s just invisible. As a rough illustration, if RO-related costs work out at around 2p per kWh, a business using 100,000 kWh a year would be contributing in the region of £2,000 toward it over twelve months.
Illustrative only. The RO is not itemised on a business bill, and the real figure moves with the annual obligation level, your usage and your contract.
For a larger site on a half-hourly meter, the absolute amount is bigger again, simply because there are more units for the cost to attach to. It’s one of the reasons two businesses on the same headline rate can still pay noticeably different totals.
Who pays, and how
Every electricity consumer in Great Britain has effectively paid into the RO, because the obligation falls on suppliers and suppliers recover it through their prices. There’s no opt-out for a business, large or small. It applies to electricity only, not gas, and it reaches you through the per-unit rate rather than the standing charge.
That means your RO contribution scales with how much electricity you use. A high-consumption manufacturer carries far more of it than a small office, even on identical pricing, which is part of why understanding your unit rate matters when you compare contracts.
Why it closed to new projects
The RO closed to new generating capacity in 2017. By then the certificate approach had done much of its job, but it had a weakness: it didn’t give generators a guaranteed price, so it left a lot of risk on the table and arguably cost more than it needed to. The government moved to a system that locked in prices instead.
Closing to new projects did not switch the scheme off, though. Generators already accredited under the RO keep earning certificates for their full support period, which is why the scheme carries on long after its doors shut to newcomers.
What came after it
The RO was succeeded by the Contracts for Difference scheme, which supports new renewables by guaranteeing generators a fixed price and clawing back the difference when wholesale prices run high. The aim was the same, more clean generation, but with less cost risk passed to billpayers.
For a business, the headline doesn’t change much: support for renewables is still recovered through electricity charges, just through a different mechanism. If you want the wider picture of what makes up a commercial bill, our business electricity page walks through the components.
What it means for you now
In 2026 the RO is still live for existing generators and is scheduled to keep running until 2037, so it remains a quiet ingredient in your unit rate. You can’t avoid it and you can’t negotiate it away, because it’s a policy cost rather than a supplier margin.
What you can do is understand it. When you compare contracts, policy costs like the RO are baked into the rates you’re quoted, so the meaningful comparison is always the all-in unit rate rather than any single component. Knowing what sits inside that number, across the RO, the CCL and the rest, makes it far easier to judge whether a quote is genuinely competitive. For the broader context, see our business energy overview.
Frequently asked questions
What is the Renewables Obligation?
The Renewables Obligation (RO) is a UK scheme, started in 2002, that required electricity suppliers to source a rising share of their power from renewable generation. Suppliers met the target by buying Renewables Obligation Certificates (ROCs) from renewable generators, and the cost was recovered through electricity unit rates.
Is the Renewables Obligation still in place in 2026?
Yes. The RO closed to new generating projects in 2017, but it continues to operate for generators already accredited under it, and is scheduled to run until 2037. So businesses are still contributing to it through their electricity rates.
Do businesses pay the Renewables Obligation?
Yes, every electricity-using business pays toward it. The obligation falls on suppliers, who recover the cost through the prices they charge, so it reaches you through your per-unit electricity rate. There is no opt-out.
How much does the RO add to a business electricity bill?
It is not itemised, so there is no exact figure on your bill. As an illustration, if RO-related costs sit around 2p per kWh, a business using 100,000 kWh a year would contribute roughly £2,000 over the year. Treat that as illustrative, as the real figure varies with the obligation level, your usage and your contract.
What are ROCs?
Renewables Obligation Certificates are issued to accredited renewable generators for the electricity they produce. Suppliers buy them to meet their annual obligation. Different technologies earned different numbers of ROCs per MWh under a banding system.
When did the RO close to new generation?
The Renewables Obligation closed to new generating capacity in 2017. Generators already accredited before then continue to receive certificates for their full support period.
What replaced the Renewables Obligation?
New renewable generation is now supported mainly through the Contracts for Difference scheme, which guarantees generators a fixed price rather than relying on a certificate market. The cost is still recovered through electricity charges.
Is the RO shown on my electricity bill?
No. Unlike the Climate Change Levy or VAT, the RO is not listed as a separate line. It is bundled into your unit rate, which is why most businesses do not realise they pay it.
Does the Renewables Obligation apply to gas?
No. The RO applies only to electricity. Gas bills carry their own set of charges, but the Renewables Obligation is not one of them.
How long will the RO keep running?
The scheme is scheduled to continue until 2037 for generators that were accredited before it closed to new projects in 2017. After that the obligation period ends.
What’s the difference between the RO and the Climate Change Levy?
They are separate charges. The RO funded renewable generation and is bundled invisibly into the unit rate, while the Climate Change Levy is a tax on energy use that usually appears as its own line on a business bill. A business can pay both.
Can a business avoid the Renewables Obligation cost?
Not directly, because it is a policy cost recovered through supplier prices rather than a charge you can negotiate. The practical step is to compare contracts on the all-in unit rate, since policy costs like the RO are already built into the rates you are quoted.