UK solar FIT damage claims soar
Damages claims brought against the UK government in retaliation for its ham-handed attempt to retroactively cut the solar feed-in tariff (FIT) in late 2011 have spiraled to £140m ($221.6m), with the average claimant now demanding £6m in compensation.
What began as a joint complaint totaling £2.2m from three companies last summer has swelled to 17 companies across the solar and construction sectors, including Lancashire-based Solarlec and West Yorkshire-based Viscount Solar.
The legal dust-up stems from the Department of Energy and Climate Change’s (DECC) decision to bring forward a deep round of FIT cuts initially planned for March 2012 to December 2011. From industry's perspective, the abrupt move was especially insulting because it was implemented before a consultation process on FIT rates was finished.
Challenged by industry, the move was deemed “unlawful and unfair” by the UK's High Court in December 2011 – a decision upheld in January 2012 by the Court of Appeal and again by the Supreme Court in March 2012.
As a result, the government was forced to pay out the original FIT rate to installations completed during the December-March period in question.
However, the 17 companies involved in the damages claim say that did not go far enough. The FIT fiasco led to £140m in lost revenue, they say, and they must be made whole in order to fully profit from the rebound the industry is currently undergoing.
Simon Gillett, chief executive of Cornwall-based renewables developer E-tricity, one of the claimants, acknowledges that the industry as a whole has turned a corner, with the FIT now secure and the government espousing the economic benefits of PV.
“But the industry was treated very badly, and companies must be healthy and ready to work to meet demand,” Gillett says.
Among the 17 companies, individual claims range from £250,000 to “tens of millions of pounds”. Prospect Law, the firm that oversaw the FIT case, is also handling the damages claim.
The opposition Labour Party has piled on, with shadow energy secretary Caroline Flint saying the coalition government was repeatedly warned that they were moving “too far and too fast” in cutting the FIT.
“Ministers must come clean about why they pushed ahead with their unlawful plans and what legal advice they got in the first place,” says Flint.
DECC has vowed to fight the challenge.
Officials have said the cost assumptions used in establishing the FIT were grossly off base in the light of recent PV price declines, with the initial FIT offering far too high a rate of return on investment.
To have left the FIT as it was, they argue, would have been irresponsible in the current era of austerity, and potentially damaged PV’s reputation in the eyes of the public.
The current, reformed FIT is broadly accepted by both industry and government. Like Germany’s solar FIT, it allows for dramatic rate cuts if installations surge unexpectedly.