The RO places an obligation on licensed electricity suppliers to source a specified and annually increasing proportion of their electricity sales from renewable sources, or pay a penalty. The obligation for 2009/10 was 9.7%, rising to 15.4% by 2015/6.
Previously, one Renewable Obligation Certificate (ROC) was issued for each MWh of eligible generation, regardless of technology. In 2009, reforms gave new generators joining the RO different numbers of ROCs, depending on the costs and potential for large-scale deployment. New projects in more expensive technologies like offshore wind now receive more support and those that are more economic, like landfill gas, receive less.
Generators can sell their ROCs to electricity supply companies, which use them to demonstrate compliance with the Obligation. This enables generators to receive a premium on top of the sale of the electricity. In 2010, further changes included the RO being extended from its current end date of 2027 to 2037 for new projects, in order to provide greater long-term certainty for investors, and an increase in support for offshore wind projects meeting certain criteria.
The Office of Gas and Electricity Markets (Ofgem) is responsible for monitoring and enforcing compliance with the RO. Their functions include accrediting renewable generators and the issuing of ROCs.