Posted by: Nick Duxbury23/02/2012
The news that the government registered an appeal at the Supreme Court over the High Court’s ruling that it acted unlawfully in cutting the feed-in tariff, was barely news.
Some were surprised, or, more accurately, ‘disappointed’, that newly installed energy secretary Ed Davey was on board with this plan.
Choruses of disappointment echoed around Twitter on Tuesday that the new leadership had not learned from his predecessor’s follies - and it’s easy to see why. Aside from the fact that four judges have now told the government it is the wrong side of the law, and aside from the fact that taxpayers’ money is at stake, there is also all the positive rhetoric around a bright future for solar to be factored in.
Only two weeks ago Greg Barker had committed to delivering 22GW of solar capacity by 2020.
But the departure of Chris Huhne had nothing to do with his handling of the solar saga – something that seems to have passed many people by. And hopes that Mr Davey’s arrival would herald a climb-down on a stance that, though perverse, cynical and at odds with many of the government’s supposed political goals (eradicating fuel poverty, cutting carbon, creating jobs and low carbon economy etc), is saving a lot of cash also feels naïve. Uncertainty is saving far more cash to the taxpayer than it would lose by paying the costs of continuing to appeal a case the government is likely to lose. It’s a loss leader.
The real news surrounds the implications of what the government is actually arguing in its appeal. According to Solar Century and Friends of the Earth – two groups behind the legal challenge along with Home Sun – if the government were to win, it would allow them to change the FIT rate for existing PV schemes whenever it wanted.
Jeremy Leggett, chair of Solar Century, said: ‘If the appeal is successful it will allow government to change feed-in tariffs whenever it chooses, even for projects that are already installed and supposedly guaranteed the feed-in tariff. At a stroke, this would undermine investment in all UK renewables, not just PV, and show investors that the UK government simply cannot be trusted.’
This belief is shared by Andy Atkins, executive director at Friends of the Earth. He claims: ‘A successful appeal will allow ministers to slash renewable energy subsidies at any time - even for solar panels and wind turbines that have been operating for years.’
That is such a bone-chilling proposition, I really wonder why the solar lobby has not flagged it up sooner. The impact on investor confidence would be so severe I can’t imagine the promise of the FIT would be worth the paper it is written on.
In many ways it makes this a legal argument that the government can’t afford to win. At present, anyone that has installed PV and registered it with regulator OFGEM, have a guaranteed FIT at a fixed rate for 25 years. For all those that installed well before 12 December, this means they are receiving the generous tariff of 43.3p/kWh for the 25 year life of the tariff.
So far the time frame of the FITs saga has not extended beyond the 12 December to the 3 March when it is reduced anyway. The conclusion of Mr Leggett and Mr Atkins is that the decision to appeal at the Supreme Court will have implications reaching far, far further than the organisations affected in this three and a half month window. They are claiming it will impact anyone who has ever installed PV, or ever intended to install PV, with the expectation of receiving the FIT.
This is not a new implication. Indeed, it is one that I have flagged up in previous blogs from the Court of Appeal outlining the broad legal argument from the solar lobby that the retrospective FIT cut ‘shows an expectation that the government can use statutory powers to change existing payments’. It was therefore described to the court as being ‘like the government is issuing a 25 year fixed gilt bond and changing the bond rate after a year’ – meaning that the government would be fundamentally untrustworthy. So, not new, but very powerful when explicitly spelt out.
Just think what a government victory could mean for all those thousands of middle-class Tory voting consumers who invested in PV for their retirement instead of a pension based on the government promise. And then there’s all those City investors and big companies who have trusted the government’s 25 year guarantee and based their business models on them.
Sure the government would argue its new FITs system of pegged degression will mean that it never would need to act as it did in October again, so its not relevant. But trust would have been dented. And the uncertainty alone would shatter any faith in any similar scheme again – let alone the green deal.
So, while this point might not be entirely new, it has been hugely underplayed. Now that the solar lobby has played this hand – potentially scaring their own customer base – it will be interesting to see what the reaction will be.
From Green paper
Examining the latest developments from the world of sustainable housing.