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UK's solar 'leccy cash slash ruled unlawful

Govt goes back to drawing board on feed-in tariff cuts

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Campaigning organisations and the solar industry have won their legal challenge to the Government's decision to reduce subsidies to businesses and homes which use solar panels to generate their own energy.

Environmental pressure group Friends of the Earth, which had sought judicial review of the Government's timescale for proposed feed-in tariff (FiTs) cuts of as much as 50% with solar companies Solarcentury and HomeSun, confirmed the news on its Twitter feed.

Climate Change Minister Greg Barker said that the Government would be seeking an appeal "as soon as possible".

"Regardless of today's outcome, the current high tariffs for solar PV are not sustainable and changes need to be made in order to protect the budget which is funded by consumers through their energy bills," he said.

The organisations successfully argued that the 12 December 2011 cut-off point for projects to which the new rates will apply was unlawful. The Government's consultation on the tariff cuts ended on 23 December 2011.

The "botched and illegal" plans had put thousands of jobs in the industry at risk, the environmental campaigner said in a statement.

However Simon Hobday, an energy law expert with Pinsent Masons, the law firm behind Out-Law.com, said that the ruling would not necessarily force the Government to change its future plans for the solar industry.

"As I see it, the Government now has two options - it can retain FiTs at the pre-review rates, or it can revise the timeframe for the implementation of the reductions. It may have to reissue the consultation itself, depending on the nature of the ruling," he said.

"What this decision does highlight is the difficulties being caused by the nature of the Government's current energy policy. The decision will likely affect the views of investors as to certainty of their investment decisions, so in that sense this rushed consultation has not assisted the Government in achieving its goals of keeping the costs of renewables subsidies under control."

The FiTs scheme was introduced on 1 April 2010 to encourage the generation of electricity through renewable sources , providing a financial incentive for surplus electricity generated that is transferred back to the national grid.

The Department for Energy and Climate Change (DECC) proposes cutting FiTs by more than 50% from April 2012. The tariff for schemes which generate up to 4 kilowatt hours (kWh) of electricity will be reduced from 43.3p/kWh to 21p/kWh if the Government is able to proceed with its planned cuts. Reduced rates are also proposed for schemes between 4kWh and 250kWH, and for scheme owners who receive payments for multiple installations at different sites.

Rates for larger installations over 50kW capacity were already cut to new entrants from 1 August 2011 after the Government's fast-track review of the FiTs scheme.

The proposed reduction would apply to all new solar PV installations in working order and licensed on or after 12 December 2011.

Climate Change Minister Greg Barker has previously said that the Government had "no option" but to cut the tariffs in order to keep the scheme within budget.

Andy Atkins, executive director of Friends of the Earth, said that he hoped the ruling would prevent the Government from rushing the changes through.

"Solar payments should fall in line with falling installation costs but the speed of the Government's proposals threatened to devastate the entire industry," he said.

"Ministers must now come up with a sensible plan that protects the UK's solar industry and allows cash-strapped homes and businesses to free themselves from expensive fossil fuels by plugging into clean energy."

Energy giant BP has also announced its decision to shut down its solar business after 40 years. The decision was taken after the business became "unprofitable".

A report in the Guardian newspaper said that Mike Petrucci, chief executive of BP Solar, broke the news to the company's 100 remaining staff in an email last week.

"The continuing global economic challenges have significantly impacted the solar industry, making it difficult to sustain long-term returns for the company," he said.

The company has made around 1,750 workers redundant over the last three years as it has gradually closed its PV panel factories, the newspaper said.

Copyright © 2011, OUT-LAW.com

OUT-LAW.COM is part of international law firm Pinsent Masons.

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