Media Briefing Note: UK Government Loses Solar Panel Appeal

LONDON, 27 JANUARY 2012 - The Court of Appeal has upheld a High Court ruling that Government cuts to subsidies for solar panels on homes are illegal.

The Government had been looking at reducing feed-in tariff subsidies (FITs) - payments made to households and communities that generate green electricity through solar panels - on any installations completed after 12 December 2011.

On Wednesday (25 January 2012) three appeal judges unanimously agreed the proposal was unlawful.

The Government has confirmed that it will be applying to appeal to the Supreme Court.

Lis Blunsdon, Of Counsel in Hogan Lovells' Energy Industry Group, said:

"Certainty is key, regardless of the quantities of money being invested. Though this ruling will give some comfort to those affected, we will have to wait for the outcome of the Government's request to appeal further before we can draw any final conclusions."

Charles Brasted, of Counsel in Hogan Lovells' public law and policy team added:

"This decision reiterates the importance of a robust consultation and decision-making process and the legal limits on the Government's ability to make retrospective changes that adversely affect others.  However, the fact that the Court of Appeals' reasoning was different from that of the High Court may well give the Government reason to hope that it would prevail in the Supreme Court."

While the Court of Appeal did not agree fully with Mr Justice Mitting's reasons for allowing the challenge, it upheld the decision, agreeing that the Government had acted ultra vires by seeking to backdate the application of the reduction in FITs.  The Secretary of State had no power to implement the cut with retrospective effect in this way.

By changing the rate of return some time into the lifecycle of the installation, the Government changed what should have been a fixed return "analogous to the fixed rate of return on a Government bond", removing the certainty that was one of the fundamental reasons for setting up the scheme in the first place.

It is worth noting that the case will only directly impact those installations which came into operation between 12 December 2011 and 1 April 2012.  With the Government applying to appeal to the Supreme Court, certainty for those currently trying to commission and construct small-scale solar facilities is still a way off, however, this ruling will give them some comfort that green investments are still wise investments.

The ramifications of the ruling, and of the Government's continued attempts to overturn the judgments of the Courts, could be much wider than this.  With investors in large-scale low carbon projects already unsure of what Feed in Tariffs with Contracts for Difference ("FiT CfD") under the Government's Electricity Market Reform programme will bring and with other large markets such as the USA also having hiccoughs, any uncertainty will knock their confidence further.

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