UK electricity suppliers are facing an uphill battle to realise full value from green power contracts as the market for Renewables Obligation Certificates (Rocs) struggles to adjust to the successful growth of wind and solar.

Cornwall Energy's latest Within-Year Roc Forecast, covering compliance periods CP13 and CP14, illustrates how the balance between Roc supply and demand is reaching tipping point, with major implications for Roc prices and banking strategies.

With the Rugby World Cup in full swing, a scrum of opposing market factors is giving way to imminent Roc saturation and deterioration in prices.

Data from regulator Ofgem reveals a pitch invasion of Rocs on the back of stronger than expected wind and solar generation, and unrelenting high biomass output from Drax's two accredited stations. Weak demand for electricity has failed to counterbalance this onslaught and the target size of the Renewables Obligation is now being exceeded by the supply of Rocs in the market.

It is now beyond doubt that the RO target, set using the 'guaranteed headroom' approach, did not foresee flat demand, the scale of the rush for above 5MW solar projects aiming to accredit before the April 2015 closure date or very high capacity factors achieved by some offshore wind farms. Cornwall Energy now predicts a material risk of Roc oversupply for the next compliance period (2015-16).

In theory, this raises the possibility of Roc prices hitting zero, or many Rocs failing to attract the desired price. The latter is already happening: in the latest NFPA e-Roc auction on 28 August, 50,000 Rocs were left unsold having not met their reserve prices. Average values did not collapse but were down £0.20/Roc on the July 2015 auction at £42.53/Roc. It is becoming a buyer's market.

However, the full fallout might not be felt as long as commercial decisions taken by suppliers kick the issue into touch.

The Roc market has witnessed a spike in Rocs being "banked" from one year to the next, rather than being cashed in. This flexibility allows suppliers to hold onto Rocs issued in one CP for redemption in the next, but has not been widely used until recently. Banked Rocs rarely exceeded 350,000 per year over the decade prior to CP11 (2012-13), but shot up last year to a new record of 2.4 million banked from CP12 into CP13. Cornwall Energy forecasts that around 2.5 million Rocs could be banked from CP13 into CP14.

The growing banking trend should stave off market collapse, but it presents its own challenges for those seeking to maximise value from green power contracts today. It is estimated that the "cost of carrying" for a Roc from one compliance period to the next is around £1/Roc. Suppliers that are 'long' on Rocs must therefore decide whether to sell at a discount this year, or hold on and hope for a market correction 12 months down the line. All indicators suggest this will not happen.

Weather statistics show wind speeds, precipitation and sunshine hours are all significantly higher for the first four months of CP14 compared to CP13, suggesting the UK's fleet of wind and solar farms are on track for another bumper yield. Ofgem has already issued more than 13 million Rocs for April and May 2015, a 40% rise on the same period a year ago. Wind and solar deployment remains high and wind in particular is expected to peak ahead of accreditation closure in April 2016 and over the following 12-month grace period. Without a cold and still winter, which would raise demand and lower wind Roc production, CP14 is on course for record oversupply.

It is within the gift of government and regulator to increase the RO target size to more closely match generation and demand and shore up the Roc price; however, this has knock-on implications for the Levy Control Framework, the Treasury-set budget for bill-payer subsidies that DECC is struggling to stick to. Politically there is little to be gained from intervening.

Against this backdrop suppliers need to reassess their game plans. Banking has become almost a necessity but endlessly holding onto certificates creates future supply distortion that in turn encourages further banking. If the 'blood bin' is to be avoided, something has to give.