1 Executive Summary
1.1 The introduction of the Marine Supply Obligation ( MSO) in 2007 signalled the long-term intent of the Scottish Government to provide market support for wave and tidal energy development. The subsequent success of the Scottish Ministers' Wave and Tidal Energy Support scheme ( WATES) has maintained the international focus on Scotland as a market leader for marine energy technologies.
1.2 With proposals to 'band' the Renewables Obligation ( RO) currently being consulted upon, it is timely for the Scottish Government to consider whether the bands that have been proposed by the Department for Business Enterprise & Regulatory Reform ( BERR) are fully consistent with the Scottish Government's renewable policy and targets.
1.3 A move to a banded RO breaks the 1 MWh = 1 Renewables Obligation Certificate ( ROC) link by allowing a ROC to be awarded for more or less than 1 MWh of output. The Scottish Government has commissioned this study to examine primarily the level of bands within the Renewables Obligation (Scotland) ( ROS) that would be necessary to replace the level of support available under the MSO, and the effects of switching from one mechanism to the other. The study also considers the case and evidence for a different approach in relation to other renewable technologies.
1.4 Based on our analysis, values of 5 ROCs/ MWh and 3 ROCs/ MWh are suggested as appropriate multipliers for wave and tidal stream, respectively, to provide equivalent support to the MSO under a banded RO.
1.5 Consultation with device developers suggests that marine generation costs have increased since the MSO was designed, so additional support beyond the ROS bands suggested here could be required to encourage deployment.
1.6 Under a worst-case scenario, the maximum impact of the change from MSO support to marine ROC banding is a reduction in UKROC price of up to 1.5%, or a reduction in Renewable Energy ( RE) output of up to 1.3% in a given year. Since this is an extreme worst-case scenario, the actual impact on overall renewable generation and carbon emissions is likely to be much smaller than this.
1.7 Spread over all UK consumers, the maximum impact on domestic electricity bills of a move to marine ROC banding under the scenarios considered is well under 0.1% of the average bill.
1.8 In other words, it is likely that the move from MSO support to marine ROC banding will have a de-minimis impact on the cost to consumers and on the wider renewable energy market.
1.9 This study concludes that neither the rationale nor the evidence base is currently in place that would justify using ROS bands to provide additional support for renewable energy technologies other than marine energy at this stage. However, this does not preclude the possibility of implementing such support in subsequent years.
1.10 For marine and other renewable technologies in Scotland, there are additional issues to financial support, relating to grid access, planning and supply chain that must be addressed in order to bring on new capacity.