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Solar power: an update

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The Government's attempt to bypass the consultation procedure and impose a reduction in feed in tariff rates had a significant impact on the UK's solar power industry. The recent decision of the Supreme Court gives more certainty to the position.

Feed in tariff rates were initially 43.3 pence per kw/hr.  This represented the sum that the generator (potentially a private individual) could earn in addition to reducing their own domestic bills.  The Government wanted to reduce this to 21 pence per kw/hr. The reduced rate had been expected to come into effect for solar panels registered after 1st April 2012 but in October 2011 the Government said it would be applied to anyone who registered their solar panels after 12th December 2011.  The Government had announced a consultation on the proposals which was due to close on 23rd December 2011.  Notwithstanding that, the Government imposed the cut in rates before the consultation was due to conclude. 

The solar industry and other interested parties challenged this.  They were successful at the High Court.  The Government launched an appeal.  In the interim, as a result of the continuing uncertainty on the likely return on any investment, the solar power industry suffered.  Whilst the Court case was awaiting determination, the Government  declared that for any solar installation set up and registered between 12th December 2011 (their original date) and 3rd March 2012 (an arbitrary date which they selected), those new installations would receive tariffs at the existing higher rate.  This clarified the position and the market temporarily improved. 

We now have a determination from the Supreme Court.  The Government do not have leave to appeal for a full hearing as it has been decided that they do not have sufficient grounds.  They will not be able to take this further, having decided already not to take the case toEurope.  On top of everything else, the legal costs incurred by the various Claimant companies in these proceedings will now come from the public purse. 

The decision of the Supreme Court means that solar power systems installed and registered between 12th December 2011 and 3rd March 2012 will receive the higher feed in tariff rates for 25 years.  Anyone who installed a solar power system and was registered before 12th December 2011 would get the higher rate in any event.  That was not one of the issues raised in the case. For installations finished and registered between 3rd March 2012 and 31st March 2012, they will temporarily get the higher rate tariff until 1st April 2012 when it will be reduced to the lower rate of 21 pence per kw/hr.  Schemes finished after 1st April 2012 and thereafter will receive the reduced rate only.

The Government had initially planned to pay the feed in tariffs at the higher rate until 1st April 2012 and thereafter at a much reduced rate.  Looking back, that is effectively what has happened.  The Government’s attempt to shake up the consultation process  created a great deal of uncertainty in the market, cost a great deal of disruption and affected both business and individuals working within the industry.  It also meant that the Government has now had to pay a significant amount out in legal costs.  A number of people who were thinking of installing solar panels in October 2011 decided not to do that because of the Government’s initial announcement to pay the lower rate from 12th December 2011 onwards.     Those individuals, had they proceeded with their installations, might well have received feed in tariffs at the higher rate of 43.3 pence per kw/hr.  Their decision not to proceed with their installations will have saved the Government a significant amount in tariff payments. If those same individuals proceeded now, their tariffs would be set at a much lower rate.  Of course we will never know if the action of discouraging individuals from installing new solar panel systems from October 2011 onwards and achieving the higher tariff rate was the Government’s primary intention all along.

This is not legal advice; it is intended to provide information of general interest about current legal issues.

If you require any further information or advice in relation to this article please do not hesitate to contact Michael Callaghan on 01245 493939 or email him at callaghanm@gepp.co.uk

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