In a unanimous judgment the Court of Appeal ruled that the Government's proposal to reduce feed-in tariffs (FiTs) for solar photovoltaic (PV) schemes completed after 12 December 2011 - 11 days before its consultation on proposed new rates ended – was outside the scope of its powers.
"It would be curious to contemplate a statutory provision which envisages a scheme for financial incentives to capital investment to encourage small-scale electricity generation in which the return could be varied once the capital expenditure had been incurred... to do so would be to take away an existing entitlement," said Lord Justice Moses.
In line with the Government's contingency plans, announced last week, the current tariff of just over 43p/kWh is now likely to remain in place for all projects in working order and licensed by 3 March 2012. Projects certified afterwards will qualify for the higher rate until a new reduced tariff of 21p/kWh comes into force on 1 April 2012.
FiTs provide a financial incentive to businesses that generate electricity from renewable sources, and vary according to the renewable technology that is used. Once accreditedunder the FITs scheme, the installer becomes eligible for payments for the life of the generation equipment subject to a maximum period of 25 years.
The Government has said that its cuts are necessary due to the falling costs of solar installation equipment and the unexpected success of the scheme. Court action stemmed from a successful judicial review brought by environmental pressure group Friends of the Earth with solar companies Solarcentury and HomeSun.
In a message posted on Twitter shortly after the verdict was handed down today climate change minister Greg Barker said that "win, lose or draw... important we move forward together, drive down costs and step up deployment". However, a spokeswoman for the DECC told Out-Law.com that the Government would be seeking leave to appeal to the Supreme Court.
Environment and energy law expert Linda Fletcher of Pinsent Masons, the law firm behind Out-Law.com, said that the ongoing legal battle had already had an impact on growth in the solar sector. Uncertainty remained surrounding other aspects of the Government's consultation process, including the effect of a new minimum energy efficiency requirements and proposals for scheme owners who receive FiT payments for multiple installations at different sites.
DECC announced last week that it would publish the full consultation outcome on 9 February 2012, alongside proposals for the next phase of its comprehensive review of the FITs scheme. The consultation had received over 2,000 responses, it said.
"This will of course be the subject of a further consultation," said Fletcher. "This continued review process will do little to reassure the sector, and although the Government has been concerned at the greater than expected take up of the incentives and disproportionate support for solar PV to date it may ultimately lead to investors pursuing other renewables technology."
"It was hoped that moving some funding from Renewables Obligation Certificates (ROCs) to FiTs would enable the Government to re-examine its level of financial support for solar PV installations and to reconsider the dramatic cuts in the levels of support it is proposing. Instead it is giving confusing messages as to its support to grow the 'green economy, particularly when compared to the availability of similar incentives in other European countries such as Germany," Fletcher said.
Jeremy Leggett of Solarcentury, one of the companies involved in the judicial review action, said that the renewable energy industry would welcome the judgment.
"Renewables can only play the pivotal role necessary to deliver a new green economy if we have a stable market and investor confidence backed by lawful, predictable and carefully-considered policy. Today we have reminded Government that it will be held to account when it acts illegally and tries to push through unlawful policy changes," he said.
The campaigners have claimed that Government attempts to rush through the plans have put 29,000 jobs at risk.