A year after the energy minister slashed the feed-in tariff for solar power the legal ramifications are still emerging, with the latest challenge coming in the form of a class action

Tim Willis

Back in April I considered the implications of energy minister Greg Barker’s announcement of a change to the rates for feed-in tariffs (FITs) in this magazine.

Barker’s announcement on 31 October that the government intended to slash FITs for solar power by more than half for installations that had not applied for certification before 12 December threw the industry into turmoil.

The proposals, made before the date for the ongoing consultation had closed, gave customers until 12 December 2011 to get their solar systems installed and to have made their application for FITs to qualify for the higher FIT rates. After that date, installations would receive the higher rate until 1 April 2012 but then move onto the lower tariff.

The minister’s actions were successfully challenged at first instance in judicial review proceedings and determined to be unlawful. The government appealed to the Court of Appeal which upheld the judgment at first instance. The government then sought leave to appeal from the Supreme Court. On 23 March the Supreme Court refused the government’s application.

The successful outcome of the judicial review proceedings to some extent reduced the potential damage of the government’s actions. That said the judicial review proceedings did not seek to compensate any of those who had suffered losses as a result of the announcement. It would be some time until the full implications of the minister’s actions both in terms of business confidence and in terms of compensation would be known.

Judicial review proceedings did not seek to compensate any of those who had suffered losses

The long-term implications were that certain business models predicated on the structure of the FITs policy were rendered economically no longer viable and following further review of the FITs scheme have largely disappeared.

It can be seen that the manner in which the government acted has damaged investor confidence.

The government in subsequent consultations has sought to stabilise the marketplace but even now the frequent announcement of consultations and ever-moving government policy is a real challenge to those who need to plan projects over a period of six months to a year.

Local authorities in particular or community energy projects have been badly affected by the apparent lack of certainty. The most recent review of larger scale solar PV has again raised uncertainty in the market.

Following the Supreme Court’s refusal of leave to appeal a view formed that there is a prospect of bringing either individual cases or a class action.

A case was brought in July by three solar companies initially seeking £2.2m in damages from the Department of Energy and Climate Change (DECC) over the feed-in tariff fiasco.

The company’s lawyers, who won the initial legal action, issued DECC with a “letter before claim” formally requesting the £2.2m in damages. DECC had two weeks to respond to the letter, raising the prospect of further High Court legal action if, as expected, it resisted the call for compensation payments.

The companies allege the government’s illegal attempts to halve feed-in tariff incentives without due notice led to a drastic drop in consumer confidence and significantly reduced orders, as well as the overnight loss of substantial contracts, such as planned “free” solar schemes. Solarlec PV Solutions, one of the companies seeking damages, said the firms were justified to seek damages from the government for the loss of earnings and disruption that resulted from its actions.

More recently five further companies have announced that they will join the three previous solar companies in requesting damages from DECC. The move brings the total demand for compensation to approximately £50m.

Companies looking to join the damages claim being bought against DECC had until last Wednesday (31 October) to do so - a year after the original ministerial announcement was made by Barker.  

Tim Willis is construction partner and head of renewables at Harrison Clark