Government Loses Appeal to Reduce Solar Subsidies

On 25 January 2012, the Court of Appeal ruled that that the government’s attempts to prematurely halve solar subsidies paid to households with solar photovoltaic (“PV”) panels were unlawful because they breached the statutory scheme for modifying “feed-in tariffs” (“FITs”) under Section 42 of the Energy Act 2008.  This decision upholds the decision made by the Administrative Court on 21 December 2011.

The FITs programme was launched in the UK in order to encourage British householders to invest in solar panels.  Under the programme, owners of solar panels are paid for the electricity they generate at an original rate of 43p per kilowatt-hour.  However, the programme met with unexpected popularity and resulted in the subsidies becoming unaffordable.

The Department of Energy and Climate Change (“DECC”) consulted on phase 1 of the FITs programme in October 2011 and decided that a reduced tariff rate of 21p per kilowatt would be paid to anyone who installed solar panels after 12 December 2011.  This reduced tariff had been expected to come into effect from 1 April 2012 and the decision therefore drew strong objections from environmental groups and businesses who claimed that thousands of jobs could be lost as a result of its early implementation.

DECC secretary Chris Huhne defended the government’s decision by claiming that it would “maximise the number of installations that are possible within the available budget” and indicated that the DECC would seek permission to appeal the Court of Appeal’s judgment to the Supreme Court.

However, John Cridland (Director General of CBI) stated that the judgment should “draw a line under this saga, which saw the government scoring a spectacular own goal and confidence in the renewable sector undermined”.  Ash Sharma (solar expert at IMS Research) also condemned the government’s actions stating that it would create “further confusion amongst the industry and prevent homeowners and businesses from fully understanding the potential risks and rewards of installing their own solar PV systems”.

The government has already put a contingency plan in place which means that any installations past 3 March 2012 will attract the lower rate.  However, the rate which will apply to those who install solar panels between 12 December 2011 and 3 March 2012 will remain unknown until the conclusion of the DECC’s threatened appeal to the Supreme Court.

Peter Bott
Trainee Solicitor
PBott@LawBlacks.com

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