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Government deals further blows to renewables sector

Today, the government has dealt yet another blow to the renewables industry with the release of two consultations. If the proposals are adopted, the impact would be a further reduction in financial support and certainty for projects of 5MW capacity or below.

One consultation focuses on solar PV, the other impacts a wider range of technologies. We consider both in our summary below.

1. Changes to financial support for solar PV

Today's consultation proposes further cuts to renewables funding with the early closure of the Renewables Obligation (RO) across Great Britain for solar PV projects of 5 MW and below from 1 April 2016, a year earlier than previously expected.

Today's consultation proposes that:

  • the RO be closed to any new solar PV installation of 5MW and below with a commissioning date on or after 1 April 2016;
  • if additional capacity is added to an existing accredited installation of up to 5MW total installed capacity on or after 1 April 2016, support under the RO will not be available;
  • in England and Wales, grandfathering will be removed for solar PV projects of 5MW and below that are not accredited under the RO as at 22 July 2015. However, the consultation proposes that grandfathering continue to be available where a significant financial commitment has been made. The criteria to be satisfied are the same as those set out in relation to grace periods (see below);
  • a banding review will be launched for solar PV projects in England and Wales of 5MW and below.

As is usual when support is removed, the government is proposing a grace period for projects in limited circumstances. If a project satisfies the criteria for a grace period, it will continue to benefit from RO support after 31 March 2016, provided that it is accredited on or before 31 March 2017 (when the RO closes completely). In order to benefit from a grace period, one of the following criteria must be met and evidence must be provided to Ofgem with the application for accreditation on or before 31 March 2017:

  • Preliminary accreditation under the RO was obtained for the installation on or before 22 July 2015.
  • Significant financial commitments were made on or before 22 July 2015.  The consultation sets out the necessary evidence as (i) a grid connection offer and acceptance of that offer (both dated no later than 22 July 2015), (ii) a Director's Certificate confirming ownership of the land, a lease of the land, an option to lease or purchase the land, an agreement to lease the land or that the developer or a connected person is party to an exclusivity agreement in relation to the land (dated no later than 22 July 2015), and (iii) confirmation that a planning application has been received by the relevant planning authority in respect of the project no later than 22 July 2015 or a declaration that no planning permission is required.
  • Delays in the planned grid connection to the electricity grid due to factors outside the developer's control. The consultation sets out the necessary evidence as (i) a grid connection agreement consisting of a grid connection offer, acceptance of that offer, and a document from a network operator which estimated or set a date no later than 31 March 2016 for delivery of the connection, (ii) a written declaration by the generator that to the best of their knowledge the generating station would have been commissioned on or before 31 March 2016 if the connection had been made on or before the estimated grid connection date, and (iii) a letter or email from the network operator confirming that the grid connection was made after the estimated grid connection date and that the failure to make the connection before the estimated date was not due to any breach of the grid connection agreement by the generator/developer.

It is proposed that the grace period will apply to both new installations and additional capacity.

The consultation closes on 2 September 2015.

2. Changes to Feed-in Tariff (FIT) accreditation

Pre-accreditation is available to solar PV and wind projects above 50kW and is also available for all hydro and anaerobic digestion projects. However, today’s consultation proposes the removal of the pre-accreditation process.

The effect of these proposals, if implemented, will be that instead of generators knowing the tariff level that will be obtained in advance of commissioning (provided the project is commissioned and full accreditation applied for within a specified timeframe) they will receive the level in place at the date of accreditation. With tariff levels continuing to fall, developers will be left uncertain of what tariff will be available to them. The likelihood is that developers will find obtaining funding for new schemes more difficult, as funders will not know what tariff will be available. That uncertainty could lead to reluctance to provide finance.

Community groups and schools with solar PV installations not exceeding 50kW can apply for pre-registration. This is a type of pre-accreditation and guarantees a tariff rate as at the date the application for pre-registration is received by Ofgem. The consultation also recommends that pre-registration be removed from the FIT scheme.

The development of community projects and schools with solar PV installations, which currently benefit from an extended pre-accreditation period, is likely to fall dramatically once the certainty from pre-accreditation is removed. The government clearly acknowledges that this is a potential issue, as the consultation states that the changes will have a particular impact on the community sector and, as part of the FIT review which will take place later this year, the government may consider whether there is a case for reintroducing pre-accreditation and pre-registration for communities or other groups. As such, it seems that the proposal to remove pre-accreditation and pre-registration is being taken prematurely and without full consideration.

The proposed changes remove some of the very principles designed to promote deployment and investment. Investor confidence will be shaken, impacting on lenders and developers who have invested millions in clean energy over the years.

The consultation closes on 19 August.

Further consultations will be issued later this year so the sector should remain braced for yet more bad news.

Contributor: Alexandra Holsgrove Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

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