All posts from: January 2012
Call me old fashioned, but I think there is something to be said for at least trying to be the bigger person in an argument.
That means, if you are winning, not to crow and goad, and if you are wrong, to admit it. Right now neither the government nor the solar lobby seem to want to learn any lessons from their bitter clash.
First off, the government. Four judges have now ruled that the cutting of the FIT with just six weeks notice and before the consultation process was even complete was illegal.
That means it was wrong. Wednesday’s decision was, ahem, decisive. On both occasions – in the High Court before Christmas, and in the appeal yesterday - the government was told that, not only had it acted illegally in its retrospective action, but it also had no chance of appealing.
Were the government a private organisation, only the most stubborn/litigious challenger would continue pushing against the letter of the law.
Shareholders would put the brakes on very swiftly as the legal bills racked up. Well, it’s not private money – it’s taxpayers’ money. And Chris Huhne’s dismissal of £66,000 as ‘a few thousand’ next to the £1.5 billion he claims he is saving consumers by intervening demonstrates where the moral high ground starts to fall away into the low ground.
To date, even if you disagree with it, the government’s appeal is understandable. Yes tens of thousands of pounds of tax payers’ cash is a fair price to pay if the government has consumers’ bills in mind. But now, after it has been made very clear that the government was wrong it is very hard to justify continuing to appeal the decision.
The government is seeking permission to appeal in the Supreme Court, thus eking out the period of uncertainty in which potential investors will not know whether or not they would receive the 43.3p/kWh FIT or the 21/kWh rate. This is time wasting. It feels extremely calculated.
We report this week on several landlords gearing up to take advantage of this narrow window in which they might be able to claim the 43.3p rate before 3 March when the rate will definitely fall to 21p.
This is exactly what the government wants to avoid. Its budget is blown and if even one 100,000 home social landlord PV scheme goes ahead before 3 March it will slip further in the red. As we report tomorrow, Stockport Homes alone stands to make an additional surplus of £5.8 million if the government is denied an appeal in the Supreme Court. That is huge.
This scheme was designed to be viable at the 21p rate, so it was going ahead anyway.
But the 100,000-home Merseyside scheme will only go ahead if the FIT rate is 43.3p. Uncertainty is still holding it back. From the government’s perspective, maintaining that level of uncertainty will hold back the majority of opportunistic installations between now and 3 March.
Hence, the attempt to appeal in the Supreme Court. If they win, then they have saved a hell of a lot of cash and made a point of principle. If they lose, then, ah well – at least they prevented a gold rush of FIT seekers, and can always sleep soundly at night in the knowledge that they were acting in the best interests of bill payers. And if they are denied permission to appeal, then that is bad news.
But at least they have held back the tide for another valuable week.
It is hard not feel that the government is playing the legal system to fight a battle they never expected to win in order to save money in the long run.
If you accept this hypothesis of damage limitation (however short sighted that might appear given the huge damage inflicted on trust in the government and investor confidence ahead of the green deal) then it is even harder not to feel the pain of the solar lobby.
They have fought a good fight and are being frustrated by what appears to be extremely disingenuous tactics from the government. Just as, on the one hand climate change minister Greg Barker offers sound bites on Twitter such as ‘win, lose or draw today, important we move forward together, drive down costs and step up deployment’, on the other, he extends the period of uncertainty in the face of a strong legal slap down. I can only imagine how galling that must feel.
However, the solar industry must not legitimise the government’s arguments by acting foolishly.
Within an hour of the verdict, I was already receiving press releases from companies feverishly selling a second ‘gold rush’.
One release from a company that I will save the embarrassment of naming said: ‘CONSUMERS SET FOR SOLAR BONANZA AS GOVERNMENT LOSES RIGHT TO APPEAL OVER FEED-IN-TARIFFS’. Homeowners have been given a short-term window of opportunity to enjoy a solar power “gold rush”.’
A solar bonanza – is that really on the cards? And if it is, surely it’s not sensible? Is this not a bit like throwing fuel on a fire?
Another one: ‘In a swift u-turn the government has doubled financial incentives for installing solar panels following a successful court case by Friends of the Earth. Energy experts are advising to install panels now, as there will never be a better time.’
Er, what u-turn is this? I don’t recall seeing one of those?
First of all, it goes without saying this is hugely misleading and just as calculated as the government’s attempt to appeal again in the Supreme Court.
Until the legal battle is over, there remains considerable uncertainty over what the FIT rate will be between 12 December and 3 March. To promise returns at the 43.3p rate is mis-selling a product that should be about carbon reduction and saving energy bills rather than a potentially mythic return. In short it is unethical.
Secondly, regardless of your views on the way the government bungled the FITs saga to date, it is difficult to argue that the 43.3p rate wasn’t too high and that they were wrong to act. Even Friends of the Earth acknowledge the need for a cut to the FIT.
It is therefore irresponsible to begin hyping yesterday’s judgement as a ‘gold-rush’ to be taken advantage of.
Mr Barker has already warned that every home receiving FITs at the 43.3p level now will deny households of receiving it at the 21p rate after 3 March. Why would firms justify the government’s arguments? This kind of behaviour suggests that some elements of the solar industry have not learned from the last four months saga.
As tempting as it may be to lash out or do whatever can be done to retrieve some much needed business, it is important for the solar industry to continue to hold the moral high ground that it worked so hard to win – because that is the only way long term trust can be rebuilt.
You can spot them a mile away.
The pallid deathly paleness, dark rings under their bloodshot eyes, yellow sweat stains on two day-old shirts, stubble, and twitching from too many nights knocking back Red Bull and necking coffee.
These are the sustainability bods; specifically the ones tasked with responding to the government’s green deal consultation before the deadline yesterday.
Yep – for the first time in a long while these folk are probably sick of discussing the green deal. You would be too if you’d had to wade through nearly 2,000 pages of consultation document and accompanying impact assessment before drawing together a considered, succinct reply.
It would appear to be a thankless task – so as I read through them all over the next few weeks, hopefully I will be able to give credit where it’s due.
It’s worth mentioning that no response I have come across so far has deviated from the basic sentiment of: ‘we want this to work but with out a series of changes we are concerned that it will not meet its fundamental goal of cutting carbon to 2020 and 2050 targets’.
You can read that as ‘green deal set to fail’ – it is after all an easy headline – but ultimately this is a consultation inviting criticism so we can only be so surprised when, shock horror, the green deal gets criticised. Yes, some folk will tear chunks out of it and call for a plan B, but it’s all part and parcel of the process, and if you didn’t voice your concerns in the consultation, then you effectively hand in your ‘I told you so’ card at the DECC front desk.
If every organisation warns of potential failure without considerable change then I would suggest, for the sake of your sanity, to focus on what the suggested changes are rather the consequences of ignoring them.
Despite all that, there is some doom ‘n gloom to vent. The British Property Federation’s response which said it is unlikely carbon emission targets would be met without further action and called on the government to provide additional cash incentives to help make the scheme more attractive.
The NHF has been doing a huge amount of work on the green deal – often working with the Local Government Association - and their response reflects this.
As you might expect, they flag up the issues around excluding social landlords from accessing ECO funding that I have written about exhaustively (and will return to in more depth later). Interestingly, though, is the way it does so.
The NHF response paints the government a picture of the woes facing housing providers right now: the end of grant funding, more highly leveraged as a result of the affordable rents programme, their income streams facing an uncertain future as a result of the government’s welfare reforms, and all in all, in no position to invest large sums of cash in energy efficiency works in lieu of ECO.
It also warns that the FITs saga has had ‘a very negative effect on the reputation of DECC in the sector and sentiment about government supported energy efficiency schemes’.
With this in mind, the NHF makes a helpful pitch for some of the government’s £200 million green deal funding announced by Treasury, arguing that making that available to landlords would go some way to improving ‘engagement’ with the sector (a stance backed by the LGA).
There is even a veiled warning: ‘we have also made clear that if social landlords did not have access to any of this funding there would be very serious further consequences for the sector’s sentiment about the green deal and DECC initiatives more generally,’ it reads.
In terms of its wider concerns about the red tape surrounding consumer protection and accreditation for green deal providers, it says that in some instances the mechanisms proposed on the basis of the owner-occupier scenario are ‘cumbersome, unnecessarily costly or unworkable in the social housing sector’. It suggests that the assessment cost of £75 is probably an underestimation.
And on ECO, well – we all knew what the NHF was going to say, and it has said it well. It points out that by only focussing on solid wall insulation for hard to treat ECO funding, 85 per cent of the social housing stock stands to miss out on ECO altogether.
Finally, and most starkly, is its conclusion centring on access to affordable warmth. It argues a higher proportion of social housing tenants are fuel poor than occupiers in other tenures, and at least a million social homes need subsidy to enable improvements which would take their low income tenants out of fuel poverty.
‘The Federation and its membership support the objectives and key principles of the proposed approach, but believe significant changes to the detailed policy proposals are needed to make the Green Deal workable in the social rented sector, with ECO subsidy where necessary.
Without this, as the government is aware, social housing’s potential to be both early and significant deliverers of the green deal will be wasted, with the associated huge risks to the supply chains and policy aims of the green deal in general.’
That is certainly a blunt warning.
Even the Chartered Institute of Housing, which to date has been relatively silent on the subject of green deal and ECO, has responded candidly. CIH does say it is ‘very concerned’ that the green deal will have an ‘insufficient impact’.
Interestingly, the CIH calls for a completely separate consultation on the green deal and ECO for social landlords on the basis that the one we have just had was ‘inadequate’ for social landlords and overly aimed at the private sector.
Part of this is the lack of provision over the problem of including green deal works alongside major repair programmes and extending it to whole neighbourhoods, and the problem of getting tenant consent.
It pushes a number of point on ECO – the way it could be regressive by increasing fuel poverty for low income households, and that exclusion of social landlords from ‘affordable warmth’ subsidy is unfair.
It states: ‘Measures such as [difficult cavity walls, sloping ceilings, flat roofs and suspended timber floors] which discriminate against social tenants are inequitable in two senses: first poor households are concentrated in the social sector (47per cent of households in the lowest income decile are in social housing), second, all households pay fuel bills, from which ECO is funded, and therefore all sectors should have an equal right to ECO funds, subject to meeting the criteria.
As an aside, Inside Housing put this point to Energy Secretary Chris Huhne yesterday during an online question and answer session organised by Which?
He responded: ‘I just don’t agree that social landlords have little to gain from the hard to treat allocation, as our figures show that there are similar amounts (proportionally) of solid wall homes in the social housing sector as elsewhere. Because most social homes are now up to decent homes standard, it makes sense to concentrate affordable warmth where the biggest problems are.’
That could change soon, though. Issues around ECO being flagged up elsewhere in the nation media over the last few weeks. The Times’ Tim Web has been covering it – and more recently, The Guardian’s George Monbiot (who originally flagged up the inequitable way the FIT works) has been blogging on green deal and ECO.
When I first revealed about landlords exclusion from affordable warmth (denied by the government at the time) and the findings in the interim results of the Hills review it didn’t strike me as a topic that would ever be sexy enough to capture the imagination of rest of the national press. Hopefully now that it has, Inside Housing’s Green Light campaign can step up a gear to make sure that ECO is not regressive, that the mistakes from CERT and CESP are not repeated, and that the most vulnerable people are protected.
Unsurprisingly, the Association for the Conservation of Energy has beef about the transition from CERT to ECO which could cause a slump in the insulation. It has also published its timely Dead CERT report into the transition to ECO. This flags up the long discussed problem the introduction of ECO (focussed mostly on hard to treat solid wall insulation) will pull the carpet out from under the feet of the loft and cavity insulation market as the expected uptake of the green deal which takes over from the CERT measures is low.
The report does not recommend a ‘son of CERT’ approach to smoothing the transition; instead it suggests aligning the green deal to ECO by allowing lofts and cavity walls delivered through green deal to contribute to ECO. It also calls for ‘fiscal incentives’ such as a VAT cut for green deal measures, use of the £200 million from Treasury to incentivise the take up of green deal packages, and linking stamp duty and council tax to home energy ratings.
It recommends increasing the ECO for low income and vulnerable households and widening the eligibility group (although it’s not clear whether this means making it tenure blind), the introduction of more regulatory standards, and the inclusion of more costly cavity wall insulation as eligible for ‘hard to treat’ ECO. The executive summary has some very interesting pie charts.
They outline some scenarios based on ACE alternative proposals in the first four years of ECO up to 2016. These include 500,000 homes insulated with loft and cavity wall insulation a year, an additional 75,000 harder to treat cavity walls to be insulated, and more than 140,000 solid wall insulations a year.
ACE claims under their proposed scenario, more than twice the proportion of ECO will be spent in the homes than need it most, saving 55 per cent more carbon and seeing 80 per cent of solid wall insulation numbers delivered under the DECC scenario installed at a rate of 140,000 a year. And all at a lower cost to bill payers than DECC are proposing.
Now, I am no sustainability bod, so am unable to properly asses the merits of these proposals.
But I am hoping that better qualified (albeit more sleep deprived) people than myself will be able to respond to this and let me know – once they have recovered from the trauma of the green deal consultation, that is.
Friday 13: a diary date that is usually associated with colossal misfortune.
As the legal teams representing the government and the solar consortium fronted by Friends of the Earth filed into court 69 (a number loaded with very different connotations of its own) of the High Court at 9.30 this morning, the question running through their minds must have been: unlucky for whom?
Despite what many thought, today was not quite the judgement day for the government we expected over its decision to slash the feed-in-tariff in half from 43.3p/kWh to 21p/kWh from 12 December – four months earlier than planned.
Before Christmas the High Court found that that this was an unlawful move because the cut came into effect before the accompanying consultation closed on 23 December. Last Wednesday, the government lodged its inevitable appeal on the grounds that Justice Mitting was plain wrong.
This morning, after months of uncertainty, sniping and waiting, the court was to decide whether to allow the government to appeal and also wrap it up into an appeal hearing. Confused? Well, it doesn’t get any clearer from here on in.
First of all, if you were expecting a firm conclusion from today, then I am sorry to disappoint.
Yes, today will be remembered as the day when one party emerges a loser, but the chances are the actual judgement is unlikely to return next week. As I predicted this morning, today will not be drawing a line under all that uncertainty.
But that is not to say it was not an interesting hearing. Upon arrival it had all the makings of a classic clash. On the left hand side of the court was the wigged team representing the big bad penny-pinching government. On the right was the wigged team of learned colleagues for the plucky green underdogs.
The pantomime set up was hard to ignore given they were surrounded by a bizarre collection of personalities from across the green sector, from solar companies (often wearing fleeces with corporate logos on, but one boss proudly wearing tails and a Hull scarf), and, of course, journalists like myself camped out on the floor. A lack of government cheerleaders wasn’t going to affect the judges though.
Justices Moses, Lloyd and Richards faced us – all three grey haired and wise – sitting on their red thrones, owl-like in their unblinking, stern focus on the techy legal details of a subject that could bore the biggest green enthusiast at the best of times. When they threw in the occasional suggestion of joke there was a disproportionate response of hilarity from the room, as everyone pretended that, in true English style, for a few minutes we weren’t witnessing an incredibly awkward culmination of months of bitterness and resentment.
The government kicked off. Its argument was long, complicated and took a long time to get to the point, but when it did, it appeared to capture the sympathy (or at least the understanding) of Justice Moses. The gist of it was as follows:
- The costs of PV have dropped substantially in a short space of time (more than expected), and the step down in the tariff rate, though significant, broadly matches this.
- The issue of fairness is not relevant to the argument over legality – but were it to be considered, the six week period provided was in fact a fair amount of notice for those schemes that had ‘crossed the starting line’. This is evidenced by the fact that 102,000 installations went ahead in that period compared with 126,000 over 18 months.
- The case should rest of the issue of purpose: the secretary of state was entitled to make the proposals (and they are just proposals being consulted on rather than a firm decision) – and given the circumstances, he was clearly acting in an administrative capacity for the best interests of the scheme, the government and bill payers.
- The secretary of state does have the power to make these modifications. Justice Mitting misunderstood the ambit of a frequently referenced Section 41 of FITs scheme documentation which enables him to act and modify.
- There was ‘a false notion of vested rights’ for generators of solar electricity. The right to payment is only subject to the lawful decisions the secretary of state may make. For those that had not made the decision to push ahead with PV, they have no rights in this respect. The principle of fairness wouldn’t limit Section 41.
- The point about retrospective changes is a ‘red herring’.
These arguments were met with a series of shaking of heads and furtive murmuring from the solar legal team. Meanwhile Justice Moses mused on the government’s problem of having to do it like you would if you were building a railway with a full consultation, ‘or you act like you might with a budget – before the days of leaks’.
After a refreshment/tweet break (@nickduxbury if you’re asking), it was back in for the second half. The solar legal team came out fighting. Extensive evidence was heard that looked to undermine the picture of reasonable actions taken under extreme circumstances painted in the morning.
A witness statement from the chair of the Local Government Association was read out telling of the inadequacy of the six week window leading up to the 12 December cut. Stories I have written time and time over were told to the three owls about the thousands of local authority and housing association installations that were abandoned as a result of the cut.
Then the impact on the many thousands of social tenants (I have previously reported this to be a conservative 38,000) who had expected to see their eye watering fuel bills cut back as a result of PV schemes was explained. Schemes such as Wrexham’s 3,000 panel plans that were left by the wayside were listed.
Next, the impact on investor confidence was emphasised. The CBI’s claim that the FIT cut has ‘evaporated’ confidence was reiterated – and, significantly it was claimed that banks are devaluing existing PV schemes because they do not trust the government. No evidence for this was given – and clearly I will try and find it – but the suggestion is deeply concerning; that banks do not believe the government will treat the FIT like a bond-like income stream it is supposed to be, and expect the government to intervene and change the FIT again in the future. This bodes very badly for the green deal and renewable heat incentive if it is true.
The argument went: ‘It shows an expectation that the government can use statutory powers to change existing payments – how that can tie into encouraging investor confidence is irreconcilable.’
It was then argued that:
- The afore-mentioned section 41 and 42 does not allow the secretary of state to amend the FIT rate. The language used is general. And, although I was not present when the argument was made that generators of renewable electricity did have vested rights, the powers were not sufficient to overturn said unproven rights.
- Anyone who installed PV after the 12 December and before 1 April has converted their potential entitlement into an actual entitlement because the law has not yet been changed (the consultation conclusions have not been published).
- The point was made that all the companies that have bought PV and built up supply chains as well as spending cash on legal fees etc have effectively suffered a confiscation of assets (this confused me, but a series of old cases were referenced that made this point and referred to the legalities of acting retrospectively).
- The FIT is supposed to be a fixed payment – ‘not the payment the secretary of state chooses to make from time to time’. A comparison was then made to government bonds: ‘It’s like the government is issuing a 25 year fixed gilt bond and changing the bond rate after a year’.
Then, on the news it would take a further hour and a half to complete the evidence process, lunch was called and I dashed back to the office to report the above to you. Apologies for not being there for the full evidence, but my escape was justified on the basis that the government’s grounds for appeal are more important than the solar lobby’s grounds against - given we have already heard them and most people are familiar with the arguments around fairness.
Also, FOE warned this could go to the Supreme Court if the government loses so it could rumble on and on and on.
So who feels luckier on this day of fabled misfortune? One solar boss watching the case told me he was pretty confident of another victory. ‘They are just waffling aren’t they?’
Maybe. But by reframing the argument completely to three separate and especially sober judges, the government’s appeal is likely to, at the very least, get careful consideration.
As for the solar lobby – well, they have waited this long, what’s one more weekend of uncertainty and irritation?
Hold the front page: the government disagrees with the High Court’s ruling that early cut to the feed-in tariff was illegal. Wow. So no one saw that coming?
It might not have sounded like news that the government was of a different opinion to the judge when, on the 21 December, he ruled that the cut to the FIT from 43.3p/kWh to 21p/kWh on the 12 December was ‘legally flawed’ due to it being implemented before the accompanying consultation closing on 23 December – but it was.
The only thing more inevitable than the government lodging an appeal yesterday, was the reaction of Friends of the Earth, Solar Century, and HomeSun and the rest of the solar lobby to the decision.
A spokesperson from FOE said: ‘The [High] court says the government has no realistic chance of winning, and it will prolong uncertainty among solar companies just when they need reassurance.’
The organisation called for the government to extend the reduction period into February, claiming that the scheme could be expanded at no cost to bill payers.
Hmmm. Similarly, on the grounds of costs, shadow environment minister Caroline Flint rallied herself to put the boot in over the cost to the taxpayer. So, all in all how could the government possibly defend its decision (apart from a case of pride and principle) to return to the courts after its first very decisive defeat?
The Department of Energy and Climate Change released a statement that shed a bit of light around the government’s grounds for appeal. It said the following: ‘The overriding aim of the proposed reduction in tariffs for solar PV (as set out in the recent consultation) is to ensure that over the long term as many people as possible are encouraged to install small scale low-carbon generation (including other technologies as well as solar PV) and benefit from the funding available for the FIT scheme.
‘Without an urgent reduction in the current tariffs, which give a very generous return, the budget for the scheme would be severely depleted and there would be very little available for future solar PV generators, or for other technologies. Our view is that the urgent steps we have proposed to protect the scheme for the future are fully consistent with the scheme’s statutory purpose.’
One of the more bizarre points their statement made was that the High Court’s decision was premature as ‘no decision has yet been taken, and a decision will only be taken after a full analysis of the responses to the consultation’.
That will surely leave many in the solar sector confounded.
Being a journalist rather than a legal expert I have no idea whether this logic will wash with the courts, but either way there can have been little in the way of surprise here.
Climate change minister Greg Barker had already warned, via his new favourite medium of Twitter, that for every house that receives the FIT at the higher 43.3p/kWh rate, there will be two that don’t receive it at 21p/kWh. The suggestion here was that his hands were financially tied and the shambolic cuts were a result of urgent action to protect the general public.
The underlying, and quite scary, implication was that the FITs budget has already been blown. And this was today confirmed by Mr Barker speaking to Business Green.
He said: ‘For the current year we are in the red and there is the potential that next year will be in the red. There’s some flexibility in the levy control framework [spending cap] on a year-by-year basis… But we have our budget and the Chancellor is not going to reopen the spending review.’
This may explain the government’s otherwise inexplicable approach to the whole FITs saga: someone hit the panic button when the Treasury refused to come to the rescue. But how on earth did this happen? Surely it was so, so preventable?
This will need to be answered in time, because, right now, as we report tomorrow, regardless of whether the government is granted the right to appeal, it is too little too late for social landlords.
Even if the FIT is returned to the 43.3p level for another few months, most boards have already made their decisions regarding PV schemes at the higher rate (almost all to abandon). There is not enough time or certainty to take advantage of this potential window. In short, confidence is shot to hell and the damage has been done.
If appealing is a delaying tactic from a desperate government with no cash left in the kitty then it has worked as far as social landlords are concerned.
As a departing aside, it is worth mentioning that despite the awful mess he has overseen of late, Mr Barker has become my favourite MP users of Twitter – if only because of his willingness to engage with his critics on it.
Unlike his boss Chris Huhne who only tweets the most mundane 140 characters he can about local surgeries, Mr Barker simply can’t stand by and see the twittersphere attacking without having the last word.
His arch nemesis seems to be Solar Century chair, Jeremy Leggett – one of the main figure behind the legal showdown.
This week produced a classic back and fourth between the two green gladiators after a great gaff by Mr Barker about the ‘green Taliban’ which seemed to suggest that, despite that small legal wrangle, the pair aren’t beyond some kind of resolution: