Government defeated in efforts to reduce solar Feed in Tariffs
Yesterday, the Court of Appeal issued their judgement on
the action brought by Friends of the Earth and others ("the
Applicant") against the Secretary of State for Energy and Climate
Change ("SSECC") in relation to their proposals for the
Feed-in-Tariff ("FIT") for photo-voltaic ("PV") installations
following the hearing on Friday 13 January.
The essence of the case comes down to a relatively simple
point. The Applicant contended that the FIT Scheme was such that
when an installation becomes eligible for its FIT it has a fixed
rate of return, subject to changes in the Retail Price Index for
the 25 year period applicable to each installation.
SSECC contended that it had statutory power to vary the FIT
not just for new installations but also for installations which
became eligible for FIT prior to any modification of the level of
In other words PV installations which were eligible for FIT
could have their level of FIT altered after they had become
entitled to it.
The proposal by the Department for Energy and Climate Change
("DECC") applied to PV installations which became eligible for FIT
on or after 12 December 2011 who would receive the present higher
FIT for a short period of time (the few months between 12 December
2011 and 1 April 2012) when they would drop down to a substantially
lower figure after 1 April 2012.
There was no suggestion that schemes which were eligible
prior to the 12 December 2011 would be affected.
The Court of Appeal found that the statutory framework for
the FIT scheme for PV, which is contained within various provisions
of the Energy Act 2008 and a number of statutory instruments,
provides for eligible installations to receive a pre-determined
rate of FIT. That rate is determined by the date the installation
becomes eligible for FIT and, the Court found, was fundamental to
The reason for this was that "it provides an assurance as to
the rate of return to an owner who has paid a capital sum prior to
the installation coming into operation". This was subject only to
fluctuations or adjustments in accordance with RPI (which the
Scheme does provide for).
The Court found that the proposals of the legislation would
have the effect of imposing a retrospective change to the FIT for
schemes which were eligible for FIT before those changes came into
effect and that the Energy Act and associated legislation did not
give the Secretary of State the power to do this.
The fact that the Secretary of State had published a warning
in the proposals, intended to alert parties who were planning to
make a capital commitment to the purchase of a PV installation that
the higher rate would only be available for a limited period, did
not alter the fact that there was no power to introduce a
retrospective modification to the FIT, nor was there power to
provide for the level of FIT (save for RPI fluctuations) to change
once an installation was eligible.
Whilst this does represent a victory for the Applicant, it
may prove to be relatively hollow. DECC has already put new
proposals before Parliament to reduce FITs applying the new rates
from 1 April 2012.
However, the proposals provide for a similar process as the
original proposals in that, schemes with an eligibility date before
3 March 2012 will receive the higher rate for their 25 year
eligibility period but schemes with an eligibility date after 3
March 2012 will receive the higher rate until 1 April 2012 and then
the lower rate thereafter.
On the basis of the decision of the Court these proposals
are also unlawful as they will provide for a FIT rate change after
an installation is eligible.
It will be interesting to see how DECC responds but is seems
clear that they will, at some point, reduce FITs for PV
installations. Whilst there will have been substantially more
warning than with the original proposals, the impact on the PV
industry is likely to be just as serious.
Posted on: 26/01/2012
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.
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