Government defeated in efforts to reduce solar Feed in Tariffs
Yesterday, the Court of Appeal issued their judgement onthe action brought by Friends of the Earth and others ("theApplicant") against the Secretary of State for Energy and ClimateChange ("SSECC") in relation to their proposals for theFeed-in-Tariff ("FIT") for photo-voltaic ("PV") installationsfollowing the hearing on Friday 13 January.
The essence of the case comes down to a relatively simplepoint. The Applicant contended that the FIT Scheme was such thatwhen an installation becomes eligible for its FIT it has a fixedrate of return, subject to changes in the Retail Price Index forthe 25 year period applicable to each installation.
SSECC contended that it had statutory power to vary the FITnot just for new installations but also for installations whichbecame eligible for FIT prior to any modification of the level ofthe tariff.
In other words PV installations which were eligible for FITcould have their level of FIT altered after they had becomeentitled to it.
The proposal by the Department for Energy and Climate Change("DECC") applied to PV installations which became eligible for FITon or after 12 December 2011 who would receive the present higherFIT for a short period of time (the few months between 12 December2011 and 1 April 2012) when they would drop down to a substantiallylower figure after 1 April 2012.
There was no suggestion that schemes which were eligibleprior to the 12 December 2011 would be affected.
The Court of Appeal found that the statutory framework forthe FIT scheme for PV, which is contained within various provisionsof the Energy Act 2008 and a number of statutory instruments,provides for eligible installations to receive a pre-determinedrate of FIT. That rate is determined by the date the installationbecomes eligible for FIT and, the Court found, was fundamental tothe Scheme.
The reason for this was that "it provides an assurance as tothe rate of return to an owner who has paid a capital sum prior tothe installation coming into operation". This was subject only tofluctuations or adjustments in accordance with RPI (which theScheme does provide for).
The Court found that the proposals of the legislation wouldhave the effect of imposing a retrospective change to the FIT forschemes which were eligible for FIT before those changes came intoeffect and that the Energy Act and associated legislation did notgive the Secretary of State the power to do this.
The fact that the Secretary of State had published a warningin the proposals, intended to alert parties who were planning tomake a capital commitment to the purchase of a PV installation thatthe higher rate would only be available for a limited period, didnot alter the fact that there was no power to introduce aretrospective modification to the FIT, nor was there power toprovide for the level of FIT (save for RPI fluctuations) to changeonce an installation was eligible.
Whilst this does represent a victory for the Applicant, itmay prove to be relatively hollow. DECC has already put newproposals before Parliament to reduce FITs applying the new ratesfrom 1 April 2012.
However, the proposals provide for a similar process as theoriginal proposals in that, schemes with an eligibility date before3 March 2012 will receive the higher rate for their 25 yeareligibility period but schemes with an eligibility date after 3March 2012 will receive the higher rate until 1 April 2012 and thenthe lower rate thereafter.
On the basis of the decision of the Court these proposalsare also unlawful as they will provide for a FIT rate change afteran installation is eligible.
It will be interesting to see how DECC responds but is seemsclear that they will, at some point, reduce FITs for PVinstallations. Whilst there will have been substantially morewarning than with the original proposals, the impact on the PVindustry is likely to be just as serious.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.