Out-Law News | 22 Feb 2012 | 2:10 pm | 4 min. read
Last month the Court of Appeal upheld a previous ruling by the High Court in determining that the Government's actions were unlawful. It ruled that it was outside the scope of the Government's powers to reduce Feed-in Tariffs (FiTs) for solar photovoltaic (PV) schemes completed after 12 December 2011 - 11 days before its consultation on proposed new rates ended.
The Government is now seeking permission to appeal against that finding at the Supreme Court. Greg Barker, Minister for Climate Change, said on Monday that a successful appeal could save consumers up to £1.5 billion in bills.
“We respectfully disagree with the Court of Appeal’s decision on Feed-in Tariffs and we have today lodged an application with the Supreme Court seeking that court’s permission to appeal. We are now awaiting a decision of the Supreme Court on permission," a spokesperson for the Department for Energy and Climate Change (DECC) said in a statement.
“We want to see the available funding spread as far and wide as possible making FiTs a scheme for the many not a scheme for the few, supporting sustainable jobs in solar and in a whole range of small scale renewable," the DECC spokesperson said.
FiTs provide financial incentives to businesses that generate electricity from renewable sources, and vary according to the renewable technology that is used. Once accredited under the FITs scheme, the businesses are eligible for payments for the life of the generation equipment subject to a maximum period of 25 years for solar projects.
The cost of installing a small-scale solar PV project has come down by approximately 45% since 2009, according to Government estimates. The resulting surge in installations put a "huge strain" on the budget for the FITs scheme as a whole, it said.
The current tariff of just over 43p per kilowatt hour (kWh) will be cut to 21p/kWh from 1 April 2012, however all projects in working order and licensed before the eligibility date will remain eligible for the higher rate for the life of that project. The Government previously announced a contingency cut-off eligibility date of 3 March 2012, unless the Supreme Court overturns the Court of Appeal ruling that its previous eligibility date of 12 December 2011 was unlawful.
"Our stated estimate that not appealing to the Supreme Court against the Court of Appeal's judgment on feed-in tariffs would lead to £1.5 billion additional lifetime costs to consumers was based on assumptions about the possible rate of PV deployment in February and March 2012, informed by the surge of installations seen in the run up to the proposed 12 December 2011 reference date," Greg Barker said in written response to a question from Green MP Caroline Lucas.
"If we had chosen not to [appeal], there would have been much greater costs to consumers both due to installations between 12 December 2011 and 3 March 2012 receiving higher tariffs (of 43.3p/kWh for installations up to 4 kW of installed capacity) for 25 years, and because of a likely increase in installation rate due to continued availability of the higher tariffs. It is very difficult to estimate by how much the installation rate might have increased, since this involves assumptions about demand for PV at the higher tariffs and the ability of the market to respond to that. We based our estimate on the observed increase in installation rate in the six weeks between the launch of the consultation on tariffs for solar PV on 31 October and the proposed reference date of 12 December, which saw 292 MW (over 74,000 installations) more PV installed than in the previous six week period," he said.
"Conservatively, we assumed that there might be an additional 200 MW installed in February and March  if the higher tariffs had remained available. Assuming the deployment was split between tariff bands in a similar ratio as earlier deployment (with around 75% of <50 kW capacity being in the 0-4 kW band), this would have led to additional costs to consumers of approximately £100 million per annum, or £1.5 billion in real, discounted terms over the tariff lifetime," Barker said.
However, the Government's appeal plans have been criticised by some in solar industry.
“We are hugely disappointed that [new Energy Secretary] Ed Davey is choosing to pursue an expensive lost cause rather than working with the industry to build a successful future for solar," HomeSun chief executive Daniel Green said, according to a report by Click Green website.
“There is no need to appeal to the Supreme Court. DECC has already achieved its objective of a solar-slowdown. Figures just out on the DECC website show that there has been a 90% reduction in solar PV installations and capacity over the last nine weeks compared to the nine weeks prior to 12th December 2011. Greg Barker’s claim that this 'extra time' could cost £1.5bn has now been proved to be completely unfounded," Green said.
Solarcentury chairman, Jeremy Leggett, said that the Government's actions had "deeply worrying" implications for the renewable energy industry, according to the Click Green report.
"Two weeks ago, Ministers reassured the industry that they wanted to see 4 million solar homes in the UK by 2020. This appeal completely undermines that claim. They need to stop rewriting the scheme, end the constant stop-start and provide long-term stability and meaningful returns for investors and customers and give certainty to the 30,000+ employees of this successful industry – one of the few that is actively creating jobs in this country," Leggett said.
"If the appeal is successful it will allow Government to change Feed-in Tariffs whenever it chooses, even for projects that are already installed and supposedly guaranteed the feed-in tariff. At a stroke, this would undermine investment in all UK renewables, not just PV, and show investors that the UK government simply cannot be trusted," he said.
Earlier this month the Government proposed reducing its subsidies for FiT schemes as the cost of the technology being used falls.
Individuals or organisations receiving FiTs for more than 25 installations will receive a new 'multi-installation' rate of 25% of the standard tariffs from 1 April. The Government has said that this reflects "the lower costs of such installations, as they benefit from the economies of scale", but that it would consult on a proposal to exempt social housing, community projects and distributed energy schemes from the rate reduction.
Energy law expert Peter Feehan at Pinsent Masons, the law firm behind Out-Law.com, said the Government would impose further cuts to its subsidies programme if its appeal was unsuccessful.
"It comes down simply to cost. If the Government does not succeed on appeal, they will simply drop the FiTs more aggressively and/or attack the larger aggregated roof top tariffs further," Feehan said.