Recommendation 29

HM Government · verbatim extract Not Addressed

BEIS acknowledges that responses to the 2021 joint BEIS/Ofgem consultation [https:// www.gov.uk/government/consultations/renewables-obligation-ro-addressing-electricity- supplier-payment-default-under-the-ro-scheme] indicated a preference for addressing supplier payment default through a requirement for suppliers to settle their obligation more frequently than the current annual arrangement. However, responses to that consultation were in many cases conflicting. There were some concerns about negative effects on some suppliers and there was also support for Ofgem introducing measures via the supplier licence. Some respondents showed support for a combination of a legislative and licenced- based approach, or for continuing unchanged with existing policy. In addition, since the launch of the consultation in August 2021, the energy market had changed significantly, 8 Responses to the Committee’s Third Report of Session 2022–23 with many suppliers exiting the market following a spike in gas prices. As the market had changed so much, BEIS needed to take time to consider the wide range of complex issues affecting the market and to consider the Renewables Obligation scheme in the round. BEIS did not consider that immediate action to introduce a legislative requirement for more frequent settlement was the right approach. Without careful design, it could have had unintended consequences, such as restricting competition in the supply market or adversely impacting the support received by generators. BEIS believes that a more fundamental change to a fixed price certificates system may offer a better solution. Under the envisaged system, generators would receive more frequent payments for their certificates from a newly established certificate purchasing body. In turn, this would require suppliers to make more frequent payments to the purchasing body to cover the cost of the scheme. However, completely changing the Renewables Obligation scheme to fixed price certificates is not a simple or quick task. To commence this work, BEIS intends to seek industry’s views on the new fixed price certificate system later this year.