The Renewables Obligation requires licensed electricity suppliers to source a specific and annually increasing percentage of the electricity they supply from renewable sources. The current level is 10.4% for 2010/11 rising to 15.4% by 2015/16. This is set out in the Renewable Obligations Order.
Generators of renewable electricity are provided with Renewable Obligation Certificates (ROCs). One certificate is issued for every megawatt (MWh) of eligible renewable electricity output that is generated.
Eligible electricity sources include biomass, wind power, photovoltaic cells, hydro electric and wave power.
In order for an energy supplier to meet its Renewables Obligation, it must provide evidence of sufficient ROCs (indicating that it has generated the required amount of renewable energy). If a supplier cannot provide sufficient ROCs, it must pay into a fund as a penalty for not meeting the Renewable Obligation. This fund is then split between energy suppliers who have provided evidence of sufficient ROCs.