UK solar firms challenge government subsidy cuts in appeal court

There is life in the British solar industry, and yesterday’s hearing at the U.K. Court of Appeal offered an intriguing insight into the machinations of government as it attempted to defend its decision to end early the Renewable Obligation (RO) support scheme for solar projects.

Brought by solar firms Solarcentury and Lark Energy, the case sought to overturn a decision made last year by Mr. Justice Green that the government was justified in closing the RO two years early – on March 31, 2015, for solar farms larger than 5 MW.

The Department of Energy and Climate Change (DECC) had argued – successfully – at the time that any cut to subsidy was always likely should certain schemes prove too popular and thus threaten to impact customers’ energy bills.

The Levy Control Framework (LCF), which was set up to manage the balance between bills and subsidy support, was intentionally worded to ensure that support for renewables could be scaled back prematurely should cost need to be cut.

The solar firms’ representative at the Court of Appeal, Michael Fordham QC, centered on this issue in seeking to challenge the government’s stance. "When you look at the LCF, it is subject to keeping promises," the QC argued.

The stance taken by Solarcentury and Lark Energy served to focus on the LCF terminology that says DECC would "maintain levels of support where it has said it would". Quite rightly, the firms said, the solar industry took that to mean that the RO would remain in place until March 31, 2017, as was started.

A statement issued by Solarcentury prior to the hearing said that the outcome of the Appeal could have "major implications for the way in which the government approaches future renewable energy support mechanism decisions including the current solar RO banding review and implementation of the 2016 small-scale solar RO closure."

Following yesterday’s hearing, Seb Berry, Solarcentury’s head of external affairs, issued the following comment to pv magazine: "The hearing focused on the central issue of whether the Levy Control Framework provides sufficient grounds in law to justify retrospective policy change. The practical and negative effect on investors of such change was a key theme of the hearing. It would be wrong for us to speculate on the outcome, which probably won’t be known for several weeks, but the verdict may have significant consequences for the way in which DECC approaches future policy changes."

Market stirrings

The psychological impact of recent government changes to the U.K.’s solar and clean energy policies has undoubtedly been damaging, not least to foreign investor confidence. However, Spanish bank, Banco Santander, has told Bloomberg that it is "very interested in the U.K. distributed generation market", and is preparing to carry out due diligence to ascertain the financial viability of supporting rooftop solar in the U.K.

The banks’s managing director and head of project finance for the U.K., Alejandro Ciruelos, told Bloomberg that the rooftop sector remains attractive – despite the 64% cut to the FIT set to be enacted on February 8 – because homeowners with solar installed also receive an export tariff for power generated but not used.

"The approach to due diligence in the generation market has to be different to how we finance large projects," Ciruelos said. "We have to find the right financing solution to back it up in a way that is efficient to those companies seeking to raise capital."

Although the U.K. does offer solar leasing and third-party financing options to homeowners, the market has yet to take off in the manner it has in the U.S. because of a lack of net metering. However, there have been rumors that net metering could be introduced into the U.K. in place of the export tariff. Should this occur, then the market for rooftop PV could gain viability despite recent FIT cuts.