UK Energy companies are possibly looking at another big bill if they fail to meet their Renewable Obligation (RO), as predicted.
Cornwall Insight has forecasted a potential shortfall of £43.8 million for 2018-19 in RO Buyout Fund payments, although not necessarily at the fault of the energy companies themselves, but rather failed competitors that have exited the market in the last year.
Under the UK’s renewables obligation, suppliers must buy a set amount of power generated from renewable sources, failing which, they pay into a buyout fund or face heavy fines.
Ultimately, the cost of the renewables obligation is ultimately passed on to the customer as part of billing, with the energy supplier then pay into the fund once per year.
Therein lies the rub – a total of 14 energy suppliers have exited the market in the last year, and taken the RO funds they were due to pay with them, leaving the country’s remaining energy suppliers to foot the bill.
The outstanding amount due is split amongst the suppliers, and the shortfall in 2017-18 of £58.6m leading several firms to stop trading due to millions owed in RO payments.
According to Cornwall, 2018-19’s tab could be as high as £100m – cost that will lead to increases in customer bills.
Renewable generators will have to wait many months longer than planned, according to Cornwall Insight’s team lead, Tim Dixon, and will add more cashflow pressure on smaller suppliers, already dealing with tougher terms implemented by Ofgem, as well as rising prices and tougher trading terms.
Dixon urged policymakers to consider more regular payments to prevent the problem occurring in the years to come.