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Damages claims "inevitable consequence" of Government's confused approach to solar, says expert

Out-Law News | 24 Jan 2013 | 1:20 pm | 3 min. read

Reports that some companies involved in solar energy are pursuing claims for damages against the Government are the "inevitable consequence of its hitherto confused" approach to subsidies, an expert has said.

Chris Hallam of Pinsent Masons, the law firm behind Out-Law.com, was commenting as press reports indicated that the number of companies seeking damages had almost doubled to 17, at a potential cost to the Government of £140 million. The group of solar energy providers, construction companies and housing associations are pursuing the Government as a result of policy changes over feed-in tariffs (FiTs), which were ruled unlawful by the High Court in December 2011.

The Department of Energy and Climate Change (DECC) has said that it will "vigorously defend" the claims.

FiTs provide long-term financial incentives to businesses and individuals that generate electricity from renewable sources, and vary according to the technology used. Once accredited under the FiTs scheme, installers are eligible for payment for the life of the generation equipment subject to a statutory maximum.

When introduced in April 2010 the scheme originally offered a generous 43.3p per kilowatt hour (kWh) to owners of small-scale photovoltaic (PV) installations with a generation capacity of less than 4kW. Unexpectedly high uptake combined with the falling costs of the technology forced the Government to conduct an emergency review of the scheme; however its planned cuts of more than 50% for new installations completed after December 2011 were overturned by the High Court due to insufficient consultation. That decision was later upheld by the Court of Appeal and Supreme Court.

The companies pursuing damages have claimed that the Government's actions led to loss of orders and redundancies in the sector. According to DECC's own figures, there was a 90% reduction in solar PV installations and capacity after the Government's original cut-off date, 12 December 2011, as compared to the nine weeks leading up to that date. This date was 11 days before the Government's consultation on the proposed new rates ended.

"Last year should have been our year for growth, innovation, investment and training, but instead it was an 'annus horriblus' peppered with cut backs, customer confusion, part time working, stress and redundancies," Simon Gillett, chief executive of E-tricity, one of the companies involved in the damages claim, told environmental news service Greenwise.

Prospect Law, the firm representing the companies making the claims, confirmed in a tweet that it was now representing 17 firms. According to Greenwise these are Solar Power PV Ltd, Solarlec, Crystal Windows and Doors, Breyer Group Plc, Freetricity Plc, E-tricity, Foz Electrical, Green Home Ltd, CI Installations, Viscount Solar Ltd, Vsolar Ltd, House Choice, Evo Energy, Solar Panels Direct, Monitor My Solar, Apollo Energy and Cleaner Air Solutions.

"It is interesting to note that some solar companies have decided not to join forces in seeking damages but instead are shifting their focus on maximising market opportunities to return growth to the solar sector," energy law expert Eluned Watson of Pinsent Masons said. "No one can argue that the solar industry has not faced a difficult time over the last couple of years and we await the conclusion of the latest legal challenge with interest, however, it is also a time of looking to the future and maximising all opportunities for the growth of solar."

The Government announced last May that it would automatically reduce solar FiTs every three months in line with demand in a bid to reintroduce certainty to the sector. Rates will be reduced by an average of 3.5% every three months depending on uptake of the technology, and may be frozen for up to two review periods if demand is low. Future support for large-scale projects up to 5 MW through the Renewables Obligation Certificate (ROC) scheme was confirmed last month.

"The degression mechanism that was introduced for solar and then for other technologies demonstrates the concern that the funds for FiTs needed to be managed so as to reflect both take up and falling costs for such technologies as the market become more developed," energy expert Linda Fletcher of Pinsent Masons explained. "There was also a concern that solar PV was dominating the use of this subsidy as opposed to perhaps more energy efficient alternatives."

Chris Hallam of Pinsent Masons said that more needed to be done if the Government was to meet its 2020 solar installation targets.

"Whilst there is now more clarity around tariffs and ROCs for solar, there needs to be some serious effort – equivalent to a tripling of current roll-out rates – for the Government to realise its aim of having 22GW of solar installed by 2020," he said. "The creation of the DECC-backed National Solar Centre in Cornwall will help further integrate solar into the construction process, but more needs to be done to improve efficiency, spur innovation and develop expertise on the ground."

"Climate Change Minister Greg Barker has said that subsidies alone will not deliver what the solar sector needs," Eluned Watson said. "With the new Solar Strategy due to be launched in the Spring and the UK Renewables Roadmap making it clear that solar PV technology is now expected to play a key role in meeting the 2020 renewables targets, industry needs to work with the Government to embrace the changes taking place - for example, by using the Green Deal to market solar PV as an energy-saving option."