The UK feed-in tariff (FIT) scheme was introduced in the United Kingdom in April 2010, under the Energy Act 2008, to encourage households and businesses to operate small scale (less than 5MW) low carbon electricity generation facilities. Under the scheme, eligible generators can receive a fixed generation tariff for each kWh of electricity generated and consumed on-site and an additional export tariff for each kWh of electricity that is exported to the grid, for a maximum of 25 years from the date an installation becomes eligible under the scheme. FIT payments are paid to generators by suppliers and funded by electricity consumers.
Of the eligible technologies (biogas, hydro, micro-CHP and solar photovoltaic (PV)), solar PV has to date been by far the most popular technology.
In February 2011, two months short of the first anniversary of the introduction of the FIT scheme, the UK Government announced that the scheme would be subject to a comprehensive review. Whilst the Government was pleased with the level of investment in solar PV technology, the take-up of the FIT by solar PV generators in proportion to other technologies had given rise to a concern that the budget for FITs for other technologies might be swallowed up and, potentially, the overall budget might be exhausted.
The announcement was followed in March 2011 by a Department for Energy and Climate Change (DECC) Consultation on fast-track review of Feed-In Tariffs for small scale low carbon electricity, which proposed the reduction of the FIT for solar PV installations of between 50kW and 250kW, effective from 1 August 2011. The DECC subsequently published another consultation, Feed-in tariffs scheme: consultation on Comprehensive Review Phase 1 – tariffs for solar PV, (the Phase 1 Consultation). The Phase 1 Consultation was published on 31 October 2011 and closed on 31 December 2011.
In the Phase 1 Consultation, the DECC proposed to reduce significantly (in some cases by half) the FIT for solar PV for installations accredited to receive the FIT on or after 12 December 2011, including a further reduction of the FIT for installations with a capacity of between 50kW and 250kW. It was proposed that the reduced FIT be applied from 1 April 2012.
For solar developers, the effect of the Phase 1 Consultation was to give them six weeks to complete the installation of solar PV projects and obtain accreditation to ensure that they would meet the 12 December 2011 deadline. Installations accredited on or after that date but before 1 April 2012 would, under the DECC’s proposal, receive the higher FIT between 12 December 2011 and 1 April 2012 (e.g., 37.8p/kWh for installations with a capacity of 4kW or less), but after 1 April 2012 would receive the lower FIT (e.g., 21p/kWh for 4kW or less installations).
The Government’s proposal to reduce the FIT was challenged by the solar power industry. Campaign groups and solar companies brought an action against the Secretary of State for Energy and Climate Change in the High Court (Regina (on the application of (1) Homesun Holdings (2) Solar Century Holdings (3) Friends of the Earth) v Secretary of State for Energy and Climate Change,  EWHC 3575 (Admin)). Central to their case was that the Government’s proposal reduced retrospectively the FIT available to installations accredited between 12 December 2011 and 1 April 2012.
In a judgment delivered on 21 December 2011, Judge Mitting held that the proposed reduction was unlawful as, inter alia, the FIT scheme did not permit a modification to be made that took practical effect from a date prior to the date that it was to come into legal effect. The Secretary of State appealed to the Court of Appeal without success and subsequently sought leave to appeal to the Supreme Court. Its application was refused on 23 March 2012.
The Future for The FIT Scheme
In a press release on 23 March 2012, the Secretary of State noted that the Government was “disappointed” by the Supreme Court decision, but that the decision “draws a line under the case”.
It certainly brings an end to the dispute over the proposal to reduce the FIT for installations that became eligible for FITs between 12 December 2011 and 3 March 2012. These installations will receive the FIT available at 12 December 2011 for the full 25 year eligibility period and without a decrease as of 1 April 2012.
The end of the dispute will not, however, alleviate the Government’s concerns that its budget for FITs and other incentives may be exhausted. Consequently, the Government continues to push forward with its comprehensive review of the FIT scheme. To address the uncertainty arising from the ongoing litigation, the DECC announced in January a reduction in the FIT for installations accredited on or after 3 March 2012, effective as of 1 April 2012. This proposal was not challenged. Subsequently, on 9 February 2012, the DECC announced Phase 2A of the comprehensive review, which sets out proposals for FITs to be applied to solar PV installations with an eligibility date on or after 1 July 2012 (see Consultation on Comprehensive Review Phase 2A: Solar PV Cost Control). Among the DECC’s proposals are a further reduction of the FIT, a cost control mechanism for tariff degression and a reduction of the period for which FITs are applied from 25 to 20 years. The consultation closed on 3 April 2012. The DECC is also separately consulting on the FIT scheme applicable to non- PV technologies (see http://www.decc.gov.uk/assets/decc/Consultations/fits-review/4311-feed-in-tariff-scheme-phase-2b-consultation-docume.pdf).
Kathryn Ilczyszyn, a trainee solicitor in London, also contributed to this article.