The government today lost its appeal against December’s High Court judgment that planned cuts to solar energy subsidies were illegal.
It could now face compensation claims from councils and households that abandoned solar installations following the announcement of the cuts.The Court of Appeal upheld the original ruling that the Department for Energy and Climate Change could not reduce the Feed-in Tariff subsidy paid to households and businesses for solar power generated. The judges said that implementing cuts before the end of a consultation on the change was unlawful.
Energy Secretary Chris Huhne said he plans to appeal to the Supreme Court.
Ministers wanted to halve the tariff to 21p per kilowatt-hour for solar panels installed after December 12 last year, although the consultation on the proposals did not end until December 23. The government said this change was needed due to a higher-than-expected take-up that could have used up the four-year £637m budget by 2012/13.
Following the High Court ruling, the government allowed the 43p tariff to remain in place until March 3.
Huhne said: ‘We want to maximise the number of installations that are possible within the available budget rather than use available money to pay a higher tariff to halve the number of installations,’ he said.
‘Solar photovoltaic [generation] can have a strong and vibrant future in UK and we want a lasting FiTs scheme to support that future and jobs in the industry.’
The Local Government Association, which had previously warned that the change could cost councils millions of pounds, called for the government to resolve the uncertainty.
David Parsons, chair of the LGA’s Environment Board, said that the announcement of the cut ‘caused the cancellation of thousands of solar panel installations’.
He said: ‘Some councils were left with little choice but to let down thousands of tenants, while writing off millions of pounds which had been spent preparing and tendering for solar panel installations which would never see the light of day.’
He urged the government ‘to go back to the drawing board’ and re-examine the planned change.The CBI called on the government to ‘draw a line under this saga’, which had undermined confidence in the renewables sector.
Director general John Cridland said: ‘We must bring certainty back to this high growth sector. Looking to the future, the government should guarantee the rate applicants will receive earlier in the process, for all the technologies covered by the feed-in-tariff, to give buyers the confidence to proceed.’
Libbie Henderson, a partner in the energy practice at law firm Dickinson Dees, warned that the decision could mean
even greater cuts to rates for new systems in subsequent years. These could be
needed to balance the impact of the higher rates continuing to be paid for systems
installed since December 12, she said.
She added that the government could
face claims for compensation after the Court of Appeal’s decision.
‘The detail of the High Court and Court of Appeal’s judgments will be of great interest to those who had made plans in reliance of the current FiT rates continuing until April 2012 and who have subsequently incurred costs. It is possible that the fallout from the government’s actions will continue for months to come.’
