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Solar PV Feed-in Tariff Update
Following our November update on the Department for Energy and Climate Change's (DECC) proposals to cut the Feed-in Tariff (FITs) for solar PV, Friends of the Earth and two solar companies challenged these proposals on the grounds that insufficient notice of the cut was given and in December the High Court agreed.
DECC's appeal to the Court of Appeal was unsuccessful and consequently DECC is unable to reduce the FITs from 43.3p to 21p per kWh until after 3 March 2012 as opposed to 12 December 2011 as DECC originally intended.
However, prior to Chris Huhne's departure as Energy and Climate Change Secretary, he stated that he disagreed with the Court of Appeal's findings and said that they were seeking permission to appeal to the Supreme Court, although the renewables industry urged DECC against appealing so as to prevent further uncertainty about the future of FITs. DECC have subsequently declared that they intend to apply to the Supreme Court for permission to appeal.
As part of a comprehensive review of FITs, DECC have recently announced that the 21p/kWh will take effect from 1 April 2012 for domestic-size solar panels with an eligibility date on or after 3 March 2012, although this may be backdated to December 2011 if the appeal to the Supreme Court is successful.
In this review, DECC have also outlined their proposals to further cut solar PV FITs on 1 July 2012. The rate at which the tariff should be cut to is dependant on the new capacity installed between the period 3 March to the end of April 2012. If this is less than 150MW then DECC propose a tariff of 16.5p/kWh. If it is between 150MW and 200MW then DECC propose a tariff of 15.7p/kWh and if it is greater than 200MW then DECC propose a tariff of 13.6p/kWh. These proposed tariffs relate to installations of less than 4kW with lower tariffs applying to different bands of larger installations.
DECC has also proposed a mechanism for further tariff degression after July (automatic baseline degression of 10% every 6 months), as well as consulting on a potential review of export tariffs and on whether the period for which tariffs for solar PV installations should be applied, should be reduced from 25 to 20 years.
Responses to this consultation should be received by 3 April 2012. Please click here for more information on the consultation.
Technical Update to Electricity Market Reform
DECC has published a technical update to July's white paper on Electricity Market Reform (EMR). The aim of the EMR is to meet the significant long-term challenge of decarbonisation and to ensure renewable energy targets are met, while maintaining secure and affordable electricity supplies.
July's white paper detailed most of the strategic framework and this technical update completes the framework by setting out:
- the Government's decision to legislate for a market-wide capacity mechanism (as opposed to a targeted mechanism) in the form of a capacity market, where all providers willing to offer capacity can sell that capacity through an auction process, which is designed to ensure consumers continue to enjoy reliable electricity supplies and avoid the higher prices that could result from tight capacity margins
- the Government's view that the system operator, part of the national grid, best meets the criteria for delivering the Feed-in Tariff with Contracts for Difference and the capacity mechanism
- detail on work to enable investment decisions for early projects
- the next steps for the EMR programme
- more detail on arrangements for Renewable Obligation Certificates from 2027 onwards
DECC intends to introduce legislation to implement the EMR in the spring of this year.
Click here to read the technical update.
Scottish Independence and Renewables
Continuing discussions surrounding a referendum on the independence of Scotland have caused uncertainty within the renewable energy sector both in Scotland and in the UK as a whole. Both the Scottish and UK Government's acknowledge the importance that renewables have to play, however, the uncertainty caused by the potential break-up of the union has led some groups such as Citigroup to suggest that companies should think carefully about investing in renewables in Scotland at present with particular concerns relating to the subsidy mechanisms and funding of existing UK-wide schemes such as FITs and Renewables Obligation Certificates in future.
However, Scottish first minister Alex Salmond has insisted that independence would not negatively affect Scotland's renewables industry and his thoughts were echoed in a report by Altium Securities which concluded that renewables investment in Scotland would not be affected by Scotland's constitutional future.
Watch this space... Maclay Murray & Spens LLP has established a working group looking at the impact on the law of full independence, "devolution max" and "devolution plus" for Scotland. We will be holding a series of workshops and seminars over the course of the year which will examine the legal implications both on a macro scale as well as looking at the impact on specific areas of the law. Of particular interest to the renewables sector and the energy industry as a whole will be how the regulatory landscape will need to adapt if independence becomes a reality.
Enterprise Investment Scheme
As part of the 2011 budget, George Osbourne announced cuts to tax relief investment schemes for wind, solar and combined heat and power. These cuts will take effect from 6 April 2012 and mean that Enterprise Investment Scheme (EIS) relief for these projects that receive FITs will no longer be available. The EIS offers investors tax relief if they make investments in qualifying industries so as to encourage investment in these sectors. The EIS is intended to help small start-ups and the Treasury have said that the FITs already eliminate the risk investors previously faced, resulting in these projects being ineligible for tax breaks like EIS. Investors in anaerobic digestion and hyrdo schemes will still be able to claim EIS relief as these sectors are not as developed and still need to incentivise further investment.
Non-Solar PV Fits Consultation
DECC have published another consultation which proposes changes to the tariffs for the four non-PV technologies currently eligible for FITs (Wind, Hydro, Anaerobic Digestion and micro-CHP) to take effect from 1 October 2012 as set out in the following table.
Proposed generation tariffs for October 2012
|Tariff band (kW capacity)
||Current tariffs (p/kWh) (i.e. no change to current policy)
||Proposed tariffs (p/kWh) from Oct 2012 |
* Current tariff levels are indicative only. Official tariff rates for 2012/13 will be calculated and published by Ofgem in March 2012.
As with solar PV, DECC has proposed a degression mechanism for each technology with all tariffs subject to a minimum degression rate of 5% per year from April 2014.
Responses to this consultation should be received by 26 April 2012. Please click here for more information on the consultation.
Ruling the Waves
The Energy and Climate Change Select Committee have published a new report on the future of marine renewables in the UK which calls for the Government to set more ambitious plans for the deployment of marine renewables and also clarify levels of revenue support and how these are likely to change over time and in particular past 2017.
The report concludes by stating that the potential long-term benefits associated with developing a thriving wave and tidal industry in the UK are significant and that an overly cautious approach at this stage may allow other countries to steal the UK's lead in this sector.
Click here for the report.
Clients in the News
Maclay Murray & Spens LLP works alongside Aquamarine Power which has recently received full consent from Marine Scotland to install a further two Oyster 800 wave energy devices at the European Marine Energy Centre in Orkney where the first Oyster 800 device was installed in September 2011. The Oyster 800 array will consist of three 800kW Oyster devices and will be the UK's first grid-connected nearshore wave power array. This consent paves the way for further consents being obtained from Marine Scotland for Aquamarine's 200MW commercial wave energy site in Orkney and a 40MW site on Lewis. On announcing the consent, the Energy Minister, Fergus Ewing said "Scotland is in the midst of a renewables revolution, and it is innovation and creativity such as that behind the Oyster device which will help us meet our ambitious renewable electricity targets and help us reindustrialise Scotland."
Maclay Murray & Spens LLP also work with ET BioEnergy, a leading company specialising in planning, financing, building and operating farm-based biogas plants which use agricultural feedstock such as maize to produce biogas which is then used to produce electricity and heat. ET BioEnergy have recently lodged plans for such a 500kW anaerobic digestion plant at the Hills of Bendochy Farm near Blairgowrie and expect a decision on the plans shortly.
Click here for more information.
Blowing Hot or Cold?
MMS Renewables will be running a joint seminar with www.xiengineering.com in May which will take a look at the current state of the UK small-scale onshore wind market including a look at the impact on the sector of a number of recent high profile incidents where defects have been discovered.
Invite and details of other events to follow...
For further information, please contact:
Head of Renewables
0131 228 7219
This briefing is written as a general guide only. It is not intended to contain definitive legal advice which should be sought as appropriate in relation to any particular matter.