Solar subsidies

Professor Robert Lee | 7 years ago

SolarSubsidies_main

Background

This case arises out of Government widely debated plans to halve the rate of subsidies supporting solar energy installations (the feed-in tariff). Fearing that the scheme was unaffordable, the Government announced a cut to the rate for all eligible installations with effect from 12 December 2011, even though its own consultation on the proposals did not expire until 23 December.

The challenge to this announcement was brought by Friends of the Earth together with two solar power companies, Homesun Holdings and Solar Century Holdings. The claimants’ case was that the decision to impose cuts on installations before the end of the consultation process was “manifestly unlawful”. It was further argued that the damage inflicted on the solar power industry as a result of projected projects which would now be abandoned was considerable.

High Court

In the High Court Mr Justice Mitting ruled that Government attempts to push through cuts in the feed in tariff for on projects registered, before the end of the consultation period on the proposals, amounted to a breach of a fair consultation procedure.

Mitting J reached this conclusion on the basis two inter-related legal issues. The first was that it was not clear that the introduction of an earlier date for the proposed modification to take effect furthered the statutory purpose of the Energy Act 2008 (the 2008 Act). The second was that it was beyond the power of the Secretary of State (ultra vires) to modify the scheme in a manner which had a significantly adverse impact on those proposing to install small-scale solar systems according to the earlier proposed timeframe.

Court of Appeal

In the leading judgment in the Court of Appeal, handed down on 25 January 2012, Moses LJ also concluded that the action of the Secretary of State was ultra vires but on slightly different grounds. This was on the basis that the scheme provides for a pre-determined rate, fixed by reference to the year in which the installation became eligible for payment, and not a rate which would be determined from time to time by the Secretary of State. This being so the impact on eligible installations could have retrospective effect.

If the impact of the delegated legislation proposed in the consultation of 31 October 2011 would have retrospective effect in relation to any installation which would have become eligible for payment prior to the proposed effective modification on 1 April 2012, then statute had to allow for this. However, section 41 of the 2008 Act in administering the tariffs did not expressly authorises this. The presumption against retrospective operation in the construction of statutes applied equally, if not more so, to the construction of a statute delegating legislative powers. Clear and express language was needed to confer power to make retrospective delegated legislation. Here there was no power contained within s.41 to introduce a modification which reduced the fixed rate. It followed that to modify the rate would be to take away an existing entitlement without statutory authority.

The future

DECC has already laid before Parliament changes that will introduce the proposed lower rate from April 2012 for installations with a 3 March cut-off. This was done to cover the contingency that this appeal ruling might go against the Secretary of State. Notwithstanding this, the Energy Secretary, Chris Huhne, announced that DECC ‘disagree’ with the ruling of the Court of Appeal and was seeking permission to appeal to the Supreme Court. However, it seems highly improbable that the Supreme Court could hear such a case before the April modifications take effect.

It is hard not to show a little sympathy for the Government. The rates were probably fixed at too generous a rate. An announcement of a modification with too long a lead time would have led to a stampede for solar power. But Ministers can only act according to their delegated powers and thus far four judges have all concluded that the powers to modify the scheme on the timescale proposed were simply not available. Moreover, the longer the issue drags on, the more the uncertainty, in relation to present contracts for solar installations, persists; and it is this uncertainty above all else that really troubles the renewable industry.

See R (on the application of (1) Homesun Holdings (2) Solar Century Holdings (3) Friends of the Earth) v Secretary of State for Energy and Climate Change  [2012] EWCA Civ. 28.

About the author

Professor Robert Lee

ERIC Director and Head of Birmingham Law School, Professor Robert Lee was co-director of the publicly funded Centre for Business Relationships, Accountability, Sustainability and Society at Cardiff University (BRASS). He is an expert on regulation, including environmental regulation and regulation of biotechnology and biomedicine. He previously worked for two top 10 UK law firms, and remains a professional-development consultant to one of the largest law firms in Europe, working on pan-European delivery of legal services.