Thursday, January 26, 2012

Next stop: the Supreme Court. Isn't this a waste of taxpayers' money?

Lord Justice Moses

DECC's decision to ask the Supreme Court to overrule yesterday's unsuccessful High Court appeal against its recent ruling on solar PV feed-in tariffs means continued uncertainty for the industry.

Lord Justice Moses at the Court of Appeal ruled that on the question of whether the Secretary of State "has power" to apply a tariff cut before a consultation period is over: "In my view, he plainly has no such power".

As campaigners celebrated their victory, Energy and Climate Change Secretary Chris Huhne said: “The Court of Appeal has upheld the High Court ruling on FITs, albeit on different grounds. We disagree and are seeking permission to appeal.

“We have already put before Parliament changes to the regulations that will bring a 21p rate into effect from April for solar PV installations from 3 March to help reduce the pressure on the budget and provide as much certainty as we can for consumers and industry.

“We want to maximise the number of installations that are possible within the available budget rather than use available money to pay a higher tariff to half the number of installations. Solar PV can have strong and vibrant future in UK and we want a lasting FITs scheme to support that future and jobs in the industry,” he said.

Industry reaction to the High Court decision is relief mixed with apprehension. Chris Hopkins – Managing Director of Ploughcroft and successful contestant on the BBC’s Dragons Den, called it "excellent news for homeowners".

But the Electrical Contractors’ Association (ECA) warned of a "wild ride" ahead for an industry that is "already reeling from Government announcements in the last few months".

Paul Reeve, its Head of Environment, cautioned: “Before anyone celebrates, we should remember that future funding for FITs is not unlimited. "Some of the available cash could now be used up in a second ‘rush to install’ before 3 March, when FITs will be halved to 21p/kWh,″ he said.

The first ‘rush to install’ took place up to 12 December to beat the Government’s initial deadline for halving FITs and resulted in far more PV installations than DECC had planned. These will now be receiving the high rate for 25 years.

"A second rush now could put even more pressure on future FITs,” observed Reeve.

Nathan Goode, Head of Energy, Environment and Sustainability at tax auditors Grant Thornton, agreed that the "judgement is prolonging the agony. Whatever the theoretical rights and wrongs of the case we need to get to a position of stability as quickly as possible to provide the solar industry and investors with the certainty needed to allow them to move forward".

The Renewable Energy Association (REA) called for an end to the "fiasco" so that "the UK solar industry can get back to business".

The Solar Trade Association and Friends of the Earth continue to warn ministers of risks to 29,000 jobs as a result of subsidy losses, arguing that the tariffs could be paid for from tax payments which the industry generates.

They put this figure at £330m per year minimum, from income taxes, corporation tax, and VAT.

But Energy and Climate Change Minister Greg Barker said in the Government's defence that the higher tariff will cost consumers £1.5bn over 25 years and sought to blame Ed Miliband for the chaos, as he introduced the system.

Howard Johns, of the Solar Trade Association, countered that it wasn't the cut, but the way Greg Barker's department had managed it which was the problem.

The coalition of campaigners also wants the Government to look again at what FoE calls "over-strict energy efficiency rules that will prevent 90 per cent of houses from claiming solar subsidies".

This refers to a new rule that, from April 1st 2012, properties must have an Energy Performance Certificate (EPC) rating of C or above, to be eligible for the feed-in tariff.

This will penalise many old, solid-walled properties which, even with double-glazing, low-energy lights, a condensing boiler, thermostatic radiator controls and loft insulation, can only score D or E on the EPC due to a lack of wall insulation.

Green electricity supplier Good Energy commented that, "it looks as if rather than encouraging greater energy efficiency, the EPC standard is just another way of discouraging FIT take-up".

Campaigners also want the Government to keep housing associations, schools, councils and other community projects on the higher tariff rate.

"Helping more people to plug into clean British energy will help protect cash-strapped households from soaring fuel bills," said Friends of the Earth’s Executive Director Andy Atkins.

Much of the industry laments the chaotic way the Government has managed the situation. Andy Boroughs, CEO of Organic Energy says he "understands that solar payments must be cut in line with falling costs, but the Government must now accept that its illegal actions were putting the industry and thousands of jobs at risk.

“The industry needs stability," he said, adding that "if the Government is serious about its commitment to the renewables, it should accept this ruling and get back down to the business of supporting a sector which is helping to grow the UK economy as well as creating sustainable jobs”.

DECC's consultation on feed-in tariffs closed on 23 December with over 2,000 responses.

Greg Barker has promised that the outcome will be announced by 9 February 2012, in time for any resulting legislative changes to come into effect from 1 April 2012.

"Our aim is that this announcement will be accompanied by a set of reform proposals for the next phase of the comprehensive review of the FITs scheme, which will be the subject of a further consultation," he added.

All of which means that the solar industry will soldier on through a fog of insecurity for some time yet.

Afterthought: Germany currently has the highest power prices within the EU (24.4 cents per kilowatt-hour), but a recent survey by Forse for the German Association of Municipal Utilities found that an overwhelming majority of Germans are willing to pay the price as long as they get green power in return.

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