Ofgem has identified a combined shortfall of over £60 million pounds in two funds underpinning the UK’s solar energy subsidy regimes, taking aim at late payments from energy suppliers.
The regulator yesterday revealed that subject to review by an auditor, a shortfall of £58.6million was found in the buy-out fund of the Renewables Obligation scheme. This requires suppliers that do not source the required proportion of electricity from renewable sources to pay into a fund administered by Ofgem.
This is used to cover the scheme’s administrative costs before being redistributed to suppliers in proportion to the amount each sourced a proportion of their supply from eligible renewable sources.
A funding gap for 2017-2018 of £102.9 million had previously been announced on 31 August, with Ofgem implementing a deadline on 31 October for suppliers to pay outstanding sums.
The regulator has subsequently launched investigations into Economy Energy and Spark Energy over their non-payment and will seek to ensure the outstanding amounts are recovered if they are found to be in breach of the Renewables Obligation Orders.
Ofgem has stated that the opening of these investigations “does not imply that we have made any findings about non-compliance”.
Spark Energy announced last week that it had engaged in merger talks with another, as yet unnamed, energy company to help it overcome the “difficult times” faced by the industry, citing the impact of the energy price cap and wholesale costs. It added that unlike previous years, the company had missed its annual ROC payment “in common with an unprecedented number of other suppliers”.
A Spark spokesperson told SPP: “We will continue to work closely and openly with Ofgem on this matter, as we have always done.”
It has also set requirements for two other non-compliant suppliers – URE Energy and Eversmart – to deliver all outstanding payments by 31 March 2019 through monthly instalments. The regulator is prepared to issue a final order to require full payment if they fail to meet these terms.
An Eversmart spokesperson said: “We are aware of the Ofgem ruling and will abide by the terms set by the regulator.”
Both Economy Energy and URE Energy failed to respond to SPP's requests for comment prior to publication.
Ofgem has also found a £4.2 million gap in supplier payments made into the periodic levelisation fund of the feed-in tariff between July and September 2018.
This provides payments to owners of small-scale renewable generators like rooftop solar and is funded through the levies on suppliers. By not paying in, non-compliant suppliers are in breach of the FiTs Order and have been referred to the regulator’s enforcement team for consideration.
Combined the RO and FiT schemes have been largely responsible for driving the growth of the solar PV market in the UK until its close in March 2017, which now is thought to have topped 13GW across all installations.
Any shortfalls in payments towards either the RO or FiT schemes will trigger mutualisation, meaning other suppliers who have complied with their obligations will be required to make up the funding gap.
Ofgem has said it will seek to secure the best outcomes for consumers and the wider energy market in either case.