Electricity is an essential good for UK households and comprises 10% of total domestic energyconsumption (DECC, 2014a). However, its generation accounts for a third of UK carbon dioxide (CO_2)emission and remains as the biggest single source of national emission (DECC, 2013a). As a result, theneed to reduce electricity demand alongside decarbonising the electricity supply is high on the policyagenda. Energy and climate change policies are expected to have a broad effect on electricity demandby making electricity more costly and therefore putting downward pressure on demand, resulting in ademand reduction ‘side-effect’, which could be considerable among the consumer population.In the UK, the main decarbonisation policy being applied to the electricity sector is the RenewableObligation (RO). The RO was implemented in 2002 to promote the deployment of large-scalerenewable electricity generation in the UK. It places mandatory requirements on electricity suppliers to“source a specified proportion of the electricity they provide to customers from eligible renewablesources” (DECC, 2013c: p.72). Punitive financial measures are applied to Suppliers if they fail to fulfiltheir obligations. Suppliers who do not meet the obligatory renewable generation capacity arerequired to make a buy-out payment via purchasing sufficient Renewables Obligation Certificates(ROCs) from renewable generators. The buy-out payments are redistributed proportionally as rewardto suppliers that have fulfilled their obligations. The implication for retail customers is that the ROcomprises the largest proportion of government costs on consumers’ energy bill (DECC, 2013c).Although some cursory research exists on the impact of the RO on energy bills, there has been noresearch to determine what impact the RO has had on UK electricity demand. Therefore, there is noclear mechanism to explain the manner and extent to which the RO affects energy demand (rather thanbills).
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