Supreme Court to decide on solar panel subsidies

The Supreme Court is to decide the fate of payments to householders who put up solar panels following a Court of Appeal ruling that the way the government is attempting to cut subsidies is unlawful.Chris Huhne, minister for energy and climate change, told the Commons that ministers 'respectfully disagree with the judgment and are seeking permission to appeal to the Supreme Court'.

The feed-in tariffs (FIT) scheme was introduced in April 2010 to enable electricity companies to make payments to small-scale producers of low-carbon energy, whether from wind, biomass or solar sources.

Appeal judges heard that since the cost of installing solar panels was higher than other technologies per unit of electricity generated, the tariff was set at a higher level.

Delivering the leading judgment in Secretary of State for Energy v Friends of the Earth and others [2012] EWCA Civ 28, Lord Justice Moses said the adoption of solar panels by communities and the public was 'unexpectedly successful'.

Moses LJ said that in the first 18 months of the scheme the take-up was double the amount anticipated for the first two years.

'The secretary of state was concerned that solar PV [photovoltaic] generators would be over-compensated and the FIT scheme budget would be breached, limiting the availability of funds to other technologies and future generators.

'In short, the tariffs for solar PVs were threatening the extent to which the FIT scheme could be afforded.'

Huhne responded by launching a consultation in October last year, proposing that a lower tariff should be paid from 1 April 2012.

Moses LJ said the appeal was not concerned with the merits of the secretary of state's proposals, but 'the form of those proposals'.

Lord Justice Moses said that the consultation proposed that the tariff would be reduced for installations that became eligible on or after 12 December 2011. These householders would only receive the higher rate until 1 April 2012.

'However, the proposal to apply the April 2012 reduced rate to installations becoming eligible before that date created consternation,' Moses LJ said. 'Proceedings were launched by those involved in the supply and installation of small-scale solar PV installations, and by Friends of the Earth championing a large number of community organisations, such as social housing schemes, village halls and schools.

'Their concern stems from the fear that the secretary of state asserts a power to modify the system they believed had been established, a system which fixed the rate of return for the generating life of the installation (subject to a maximum period).' In the High Court, Mr Justice Mitting ruled that the proposal that the April reductions should apply to installations becoming eligible on or after 12 December 2011 was unlawful. The secretary of state appealed.

Moses LJ said the secretary of state denied that his proposals would have a retrospective effect and had the power to modify arrangements for payments under section 41 of the Energy Act 2008.

However, Moses LJ ruled that this failed 'to have proper regard to the nature of the rights conferred by the scheme in the FIT year in which an installation becomes eligible.

'An owner of an installation is entitled to payment at a rate fixed by reference to and from the year in which the installation became eligible. He is entitled to that fixed rate throughout the period of generation from the moment of commencement up to the maximum specified.

'The power asserted by the secretary of state is a power to vary the rate after an installation has achieved eligibility and thus after the rate has been fixed for 25 years, subject only to RPI.'

Lord Justice Moses concluded that there was no power in section 41 to make a 'retrospective alternation' to the scheme.

'To do so would be to take away an existing entitlement without statutory authority.'

He dismissed the secretary of state's appeal. Lord Justices Richards and Lloyd agreed.