Operators of ‘clean’ electricity plant can generate revenue by selling:

·          The electricity itself

·          Levy Exemption Certificates

·          Renewable Obligation Certificates

If the electricity generated by a hydro-scheme is sold directly to an electricity company, then the price offered for the electricity itself is relatively small  - in the range 2.0 – 2.5 p/kWh on average over the year. 

Alternatively, if there is a substantial electrical load close to where the power is being generated (e.g. factory or office complex), it will be more beneficial to use the hydropower to feed that load, so displacing electricity that would otherwise be bought in from the grid at perhaps 3.5 – 5.5 p/kWh.

For smaller schemes, some electricity companies are willing to enter into a special contract which will balance the energy generated against the energy consumed on site on an annual or quarterly basis.

Furthermore, business customers who would otherwise have to pay an extra 0.43 p/kWh for the Climate Change Levy will make that additional saving on any hydroelectricity they buy from the scheme.

Levy Exemption Certificates (LECs)

Green electricity which is sold into the grid will generate Levy Exemption Certificates (LECs) which can be sold on to business customers to enable them to avoid paying the full Climate Change Levy.  The LECs can be sold for up to 90% of the Levy value.

ROCs

Electricity generated from renewable sources can be used to obtain Renewables Obligation Certificates (ROCs) which all the supply companies need in order to prove they are meeting the governments targets for renewable energy. ROCs have a market value in the range 3p – 4.5p per kWh which will vary over time depending on how well these companies are doing in meeting their targets. The concept and trading of ROCs is explained in the diagram.

Ofgem issues ROCs to all registered generators of green electricity.

They can sell them either to ROC traders or directly to the electricity supply companies who need them

to meet their Renewable Energy Quota.

Electricity Traders

There are several options on who to approach to obtain the maximum income for your scheme.  Not only will any one of the main electricity supply companies (Powergen, npower, etc.) make an offer for your output (including the ROCs, LECs, etc.), it is also possible to approach a range of specialist electricity trading companies which focus purely on getting the best price for renewable energy schemes.