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What's the court case about?
On October 31st 2011 the government issued a proposal to cut - by over 50% - the subsidies paid to anyone installing panels after December 12th 2011. Prior to December 12th anyone installing a small domestic system (under 4kWp) would receive 43.3p per kWh generated by the system, for 25 years. The government announced they were cutting that to 21p per kWh.
Cutting the subsidy was the right thing to do - the cost of an installation has fallen by some 30% over the last 18 months, thanks to a combination of falling panel prices and improvements in installation efficiency. Even with the reduced subsidy, returns of over 10%, tax free and inflation linked are available (click here for an example).
But giving only 6 weeks' notice was an unbelievably stupid thing to do, particularly when the `consultation' period relating to the changes ended two weeks after the cuts came into effect, on 23rd December 2011. How could the government be listening when the cut took effect before all responses to the consultation were due to be in?
In any event the notice period of only 6 weeks completely pulled the rug from under this young but successful industry, which in 18 months had created over 25000 jobs. The cut sparked an enormous surge in installations, causing chaos across the industry with installers working around the clock to get their order books installed, (many of which were full for much longer than six weeks). Despite the surge in installations, many larger projects which require planning permission and permission to connect to the grid had to be abandoned and the industry was forced to write off huge amounts of investment. Given that a container of stock takes 12 weeks to come in, it was inevitable that many were also left with large amounts of unsold stock.
No surprise then that two big players in the industry, Homesun and Solar Century, combined forces with Friends of the Earth to take the government to court for what was at best a nonsensical way to proceed, and at worst downright unlawful.
High Court Ruled the Cut was Unlawful
On December 21st 2011, the High Court ruled that the cut was indeed unlawful.
The judge advised the government not to appeal, but, instead of admitting their mistake and moving on, the Department of Energy and Climate Change (DECC) lodged an appeal on January 4th 2012.
Government Appeal: Latest News
On Friday 13th January 2012, the Court of Appeal was set to decide whether the appeal could be heard. If the answer was yes, they were supposed to hear it the same day.
Unfortunately they were unable to decide even whether to hear the appeal.
This is the latest statement on the DECC website (evening of Friday 13th):
"The Court of Appeal has not yet decided whether to give permission for an appeal or made a judgement on the FITs case. The Court will wrap up the decision on permission for an appeal and a possible judgement if an appeal is allowed in the next few weeks. Once the outcome is known we will consider our options and make an announcement on the way forward to provide clarity to consumers and industry."
The industry is keen for some clarity, and in a letter to David Cameron we have urged the government to end this farce as soon as possible. It remains to be seen if he will listen.
Why does all this mean I might get an 18% return?
Not being lawyers, we are unable to predict whether the government will win or lose its appeal.
The judge who made the ruling certainly thought they didn't have much hope on appeal, but that's not to say the Court of Appeal judges won't think differently.
If the government does lose, then in order to cut the rate from 43.3p, they will have to put fresh proposals before Parliament, which will take 40 days.
Therefore any installation made between December 12th 2011 and the end of this new 40 day period will attract the original higher rates. So anything under 4kWp (i.e. a standard domestic install) will attract a subsidy of 43.3p for 25 years!
So anyone installing between December 12th and the end of the 40 day period gets the double bonanza of the cost savings from drops in technology costs coupled with the higher tariff! This gives a return of 18%. Tax free and inflation linked. Beat that with your 3% Isa!
Will my installation (under 4kWp) definitely get at least 21p?
Yes as long as you install by 31st March 2012.
DECC have guaranteed that, whatever happens, any sub 4kWp installation made before 31st March 2012 will get a tariff of at least 21p.
On January 6th 2012, they issued the following statement via the REAL Assurance scheme website:
"The tariff rate for PV installations less than or equal to 4kW will not fall below 21p for installations with an eligibility date between 12th December 2011 and 31st March 2012."
This statement came on January 6th, as a direct result of a challenge made by Spirit Solar MD to the Prime Minister on January 5th - see below.
I saw your MD on TV and heard her speak on the Today programme on Radio 4. What was that all about? Why was she challenging David Cameron?
Prior to the statement made above on January 6th that the tariff applying to installations made after December 12th and before the Court of Appeal hearing would be `at least 21p', there was utter confusion as to what tariff would apply to an installation.
DECC said it would `almost certainly' not be less than 21p. `Almost certainly?' When you are spending £10,000 or more you want `certainty' not `almost certainty'.
By contrast Greg Barker tweeted:
@SolarChampion 2 b clear DECC r consulting on 21p (not lower) 4 anyone fitting pv btwn 12 Dec & 31 March. #FiTs
(Is this really how Cameron runs his government I hear you ask?! Call me old fashioned ...)
This appeared to give more certainty, but then DECC said "It's up to the minister what he says on twitter - this is not an official DECC outlet".
What a ludicrous situation. In exasperation our MD has no choice but to take her question right to the top!
So on 6th January, at a meeting of local business owners, Spirit Solar MD Erica Robb made her feelings known.
First she accused the Prime Minister of causing chaos in the solar industry. After wondering how he could be attending a meeting designed to encourage entrepreneurs when his government had so undermined business confidence with its appalling handling of the Feed in Tariff cut, she then told him "If you ring up DECC and ask them what tariff applies today, they can't tell you if its 43p, 21p, 0p or somewhere in between."
Finally she asked him "How can the government justify its appeal which is set to cause weeks more chaos and uncertainty, and can you tell me what tariff rate applies in the mean time?"
A very nice girl from Number 10 came up to our MD after the meeting and proffered her email address. (She said it was her first day - I hope it wasn't her last because she really was very helpful).
So our MD wrote an email to MD seeking further clarification. We didn't get a reply, but we did get the following statement via REAL:
"The tariff rate for PV installations less than or equal to 4kW will not fall below 21p for installations with an eligibility date between 12th December 2011 and 31st March 2012."
We'll email you a quote
- Get an accurate email quote emailed to you
- Fill in the form and we'll contact you within 24 working hours (9-5 Mon, Wed, Fri, 9-8 Tues, Thurs)
- No need to speak to anyone on the phone!