Interview: Court close to decision on UK solar subsidy cut

Henry Evans

20-Oct-2014

The outcome of a judicial review into the UK government’s decision to cut off medium- to large-scale solar developers from a subsidy mechanism could arrive as early as the end of this month, according to one of the parties behind the case.

Earlier this month, the Department of Energy and Climate Change (DECC) reconfirmed the renewables obligation (RO) subsidy would no longer be accessible to new solar projects greater than 5MW in size from April 2015, following the conclusion of a consultation launched in May this year ( see EDEM 2 October 2014 ).

But the decision to withdraw the subsidy ahead of the scheme’s scheduled closure to all new renewables capacity in 2017 is still the subject of a judicial review that was launched by four leading solar firms in August ( see EDEM 4 August 2014 ).

“There’s a court hearing scheduled later in October,” said Ben Cosh, director of TGC Renewables, one of the four firms engaged in the action.

“Sometimes the judge will give a view very quickly within a matter of days and sometimes it takes a few weeks so we could get a judgement in late October or sometime late November,” Cosh added.

Developers have been rushing to install new capacity to beat the DECC cut-off. So should the cut-off be overturned, the rate of solar power deployment could slow dramatically over the next six months.

Solarcentury, Lark Energy and Orta Solar Farms are the other solar developers involved in the case, which Cosh said has been initiated on the premise that the retrospective nature of the RO alteration is illegal.

When launching the consultation in May, DECC argued that the growth of solar deployment had outpaced initial estimates and continued subsidy under the RO scheme would place excessive demands on the government’s overall renewables budget worth £7.6bn (€9.6bn).

But Cosh said information provided by DECC reveals the early removal of solar from the RO band has the potential to save just £20m.

Grace period

As much as the removal of the subsidy itself, a series of stringent criteria set for new projects to qualify for a grace period that will allow RO qualification to be stretched to April 2016 has attracted criticism.

Projects that intend to benefit from the grace period will have to show evidence that “significant financial commitments” were made prior to the consultation being opened back on 13 May.

In its consultation document from May, DECC acknowledged that the speed of solar deployment and need for cost control had forced its hand on determining the grace period, which Cosh believes shut the door on a number of projects that were nearing financial closure.

“You’ve got those projects that might have been ready to submit [planning consent] late May or June where a developer has made significant investments, sometimes very significant investments, compared with the size of the company,” Cosh said

In place of the RO, 5MW+ solar developments will now only be able to compete for subsidy through the UK’s new Contracts for Difference (CfD) scheme, which will open to auction later this month.

Classified among a “more established” technology class, solar projects will have to bid against other renewable groups such as onshore wind and hydro to earn a share of what is widely regarded as a shallow pool of funds.

Cosh said analysis of the quantity of more established renewable types deployed in the last few years reveals demand is likely to outstrip this year’s available funds seven times over.

“What that means is, to win those auctions you’ve got to be competing at the cheap end of onshore wind prices, which solar can probably do in a couple of years,” Cosh said.

The auctions are also likely to be dominated by the largest solar developers, according to Cosh, which can absorb the impact of failing in the first auction and re-bid the following year.

“If you’re a small company, it’s very challenging I imagine to be able to survive the auction process,” he said.

And the impact of the government’s RO intervention could extend beyond a negative effect on the solar industry and puncture the confidence of investors looking at UK renewables as a whole, Cosh says. Henry Evans

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