Prospects for Hydro in the UK: Between a ROC and a Hard Place?

The Renewables Obligation has set challenging targets for renewable energy in the UK. It requires electricity suppliers to source 10% of their energy from renewables by 2010 and imposes penalties where suppliers fail to meet their obligation. For every unit of electricity derived from a renewable generator suppliers are entitled to a purchase a Renewable Obligation Certificate (ROC), a form of ‘Green’ certificate which may count towards their obligation or may be traded in a ROC market. This mechanism means that generators gain additional revenues in order to encourage renewable development. New hydro developments and upgraded schemes below a certain capacity also qualify for ROCs which should stimulate increased activity. However, significant technical, economic and environmental difficulties remain for hydro developers. The mechanisms developed to assist hydro and other renewables following deregulation are considered with particular emphasis on the impact of the recent Renewables Obligation. Finally, it looks at the prospects for future hydro development to 2010.