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Increase in REGO demand offers additional revenue stream for Renewable Assets

Author: Clare Haigh, Head of Environmental Markets, C-Zero Markets

Published: 10 Apr 2024

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Farmers and landowners with renewable electricity generating assets could be missing out on a useful income stream following recent changes in the market.

The Renewable Energy Guarantee of Origin (REGO) scheme has seen some dramatic changes in the past couple of years that have greatly increased the potential returns from this once overlooked income source.

REGOs are certificates that are issued by Ofgem for each Megawatt hour (MWh) of electricity that has been generated from a renewable source. They play a crucial role for electricity suppliers, who must be able to demonstrate how the electricity that they sell was generated as part of their Fuel Mix Disclosure (FMD). Every unit of electricity that is declared as ‘renewable’ as part of their FMD must be backed by a REGO, which is then retired in the system to prevent double-counting.

Two main factors have driven the increase in REGO values. Firstly, the growing demand from electricity suppliers wanting to evidence their use of renewable power as the UK transitions towards net zero. In addition, corporates are also now using them to demonstrate that they are buying renewable power. Secondly, the reduced supply of certificates following a change in legislation last year preventing energy suppliers buying European certificates (GOOs), requiring them to only source British REGOs.This has fuelled a significant increase in the REGO price. Originally REGOs traded for pennies, even two to three years ago REGO certificates had very little value, perhaps just 25-50p/MWh, whereas now they’re worth nearer £12-14/MWh and we have seen small volumes trade at over £24/MWh.

This has fundamentally changed the REGO landscape, enabling generators to gain significant income from their investment in renewable generation. REGOs are no longer small change – leaving REGOs unclaimed or letting them sit unsold in your Ofgem account can leave substantial value on the table, whilst also preventing them from doing their intended job of rewarding investment in renewable technology.

REGOs are tagged with the technology that was used to generate the renewable electricity, with ‘deep green’ REGOs from wind, solar or hydroelectric installations commanding a higher price than those from biomass or landfill gas.

Owners of generation sites must be registered to receive REGOs and generators can apply for their accreditation via Ofgem and many sites are likely to have already done so, often when signing up for the Feed-in Tariff.

A big opportunity is among generation sites using large amounts of power ‘in-house’ (e.g. running coldstores or chillers) where the limited export makes having a Power Purchase Agreement (PPA) unviable, REGOs can become a standalone income source. That said, even if there is a PPA arrangement in place, typically only the REGOs which correlate to the export volume would be tied into the PPA and therefore those REGOs associated with the onsite usage would sit outside of the contractual arrangements so are available to trade on the secondary market, which is likely to command a higher price.

There is no cost to the generator to administer for REGOs, it just involves a bit of time. The fees charged by third party traders are usually just a few pence per certificate, with quick payment terms.

In short, if you’ve got a renewable asset and haven’t registered or claim for the REGOs, you are missing a trick.

REGOs at a glance:

  • Any renewable generation asset: Solar, Wind, Hydro, AD or CHP should look at claiming REGOs
  • Eligible sites must be registered to claim REGOs (administered by Ofgem)
  • REGOs issued electronically, one certificate per MWh of electricity generated (generation, not export volume is key!) 
  • If there is a PPA in place which includes the REGOs on exported capacity, it is still possible to sell the REGOs which relate to power which had been used on site
  • Potential to trade unused REGOs on the open market
  • REGOs are subject to a compliance year which runs from 1 April – 31 March
  • REGOs expire after 15 months but they will drop significantly in value if they relate to an earlier compliance year
  • There is still a small window to sell REGOs generated from the previous compliance period, 1 April 23 – 31 March 24

C-Zero have a team of people who can not only help generators to register with Ofgem to obtain REGOs but also take care of administering the regular electricity generation and export data inputs needed for the claims. The final stage is assisting with finding the best route to market. Most counterparties only deal in large volumes so we can play an important role in aggregating volumes from smaller producers to make a larger batch that is attractive to these buyers.

*The views expressed are the author's and not ICAEW's