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THE IMPACT OF BREXIT ON THE UK NUCLEAR AND RENEWABLE ENERGY SECTORS

Brexit has become reality. No member of the EU has ever decided to leave, so the process of withdrawal is untested, although the vote for Brexit is only the start – not the end – of a process which may or may not, result in complete withdrawal. The position of the UK at the end of this process is as yet unclear.

It is important to understand that until the process of withdrawal is complete the UK continues to be a full member of the EU and remains subject to EU law.

The Main Question: Trading Relations and the Single Market
The main questions to be resolved between the UK and the EU will relate to trading relations. The extent to which applicable law will be capable of change depends on whether the UK wishes to enter the European Economic Area, with continuing reciprocal market access. This question was not a matter for the referendum and will be decided by Parliament following negotiations with the continuing states. The degree to which EU laws and regulations will need to be unpicked depends on those negotiations.

It is the trading relationship between member states and the UK as a non member state that will determine the extent to which the UK is required to maintain current EU legislation.

It is too early to have any view as to the likely relationship that the UK will have with the EU and, while it is possible to draw parallels between the EU’s current arrangements with states outside the EU, none of these can be said to offer a precedent. No indication has been forthcoming from the EU as to what terms may be on offer, and indeed there will, inevitably, be differing views between members states each of which hold a veto.

Fundamentally, if open access to the EU market is to be maintained through membership of the EEA / EFTA, the UK will have to agree to the free movement of goods, services and, in theory at least, labour – a compromise which, if carried through to reality, would seem to perpetuate the primary concerns of those who have recently voted to leave the EU.
Against this developing background we have sought to consider some of the issues likely to be relevant to those working in the nuclear and renewable energy sectors in the UK.

Nuclear Energy
The nuclear sector is most affected by safety and environmental law, which is governed by a number of layers. International treaties, conventions, EU directives, EU regulations, and laws established by the devolved administrations. Withdrawal from the EU will not mean automatic repeal of these various layers.

International treaties, such as the Paris and Brussels Conventions, and the domestic enabling legislation, the Nuclear Installations Act, are independent of EU legislation and will continue unchanged.

The Euratom treaty is also an independent legal treaty which, although entered into at the same time as the Treaty of Rome creating the EEC, remains independent from the subsequent Maastricht and Lisbon Treaties. The Euratom treaty is however, administered by the European Commission on which, following withdrawal, the UK will cease to have representation. The UK and the remainder of the EU will undoubtedly wish for the UK to remain subject to Euratom and therefore this is an area for future discussion.

EU directives are directly applicable in states and require domestic legislation to implement them, whereas EU regulations apply once in force. The domestic legislation implementing EU directives is made under specific legislation which can be repealed. There will have therefore, to be an evaluation exercise as to whether EU laws should be replaced by similar laws or repealed.

Renewable Energy
The UK commitment to the Kyoto protocol and the Climate Change Act 2008 is unlikely to be revoked and so, policies to encourage the generation of power through low carbon sources will continue.

It will be difficult for the UK to have substantially different policies to the remainder of Europe on global issues such as decarbonisation and cross border energy distribution if any trading relationship is to be maintained.

One area of concern is energy subsidy, where EU funding has provided an element of the financing for ROC and FIT. These will need to be covered by the UK government if continuity of projects currently under development is to be maintained.

Conclusion
At present, without further clarity being provided as to either the timetable for or the actual extent of the planned UK withdrawal from the EU, it is difficult to offer precision in relation to the effect of Brexit on these sectors. We are monitoring developments and will begin to prepare regular bulletins as to how clients should consider protecting themselves.

Introduction to Prospect Energy and Prospect Law
This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For more information please contact Edmund Robb on 01332 818 785 or by email on: er@prospectlaw.co.uk

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SUBSIDIES UNDER ATTACK? APPARENT RISE IN SHORT TERM OFGEM AUDITS

Since the fundamental changes to the Feed-in Tariff that have been introduced over the last 6 months it would appear that OFGEM has now moved its focus onto existing members of the scheme. We have noticed a significant increase in the number of OFGEM audits in the last few months investigating generating stations with existing full accreditation under the scheme, in many cases to be carried out by consultants Black & Veatch.

These audits look to be comprehensive, and investigate all aspects of the generating station’s compliance with the underlying requirements of the FIT scheme, including the specifics of commissioning, the ‘site’ of the generating station, the metering arrangements and the information provided in support of the accreditation application.

We have seen such audits issued to a variety of technologies, including Solar PV, Onshore Wind, Anaerobic Digestion and Hydro and across a wide range of installation sizes, so it would appear that this round of audits is extensive.

The audit letters request the provision of detailed information and documents prior to the date of the audit, and are often requested at short notice.  These requests may prove problematic for generating stations that have, since commissioning and accreditation, been sold on to long term investors who were not necessarily involved in the initial development and construction phase. We are working closely with our clients to assist in responding to these OFGEM audit requests.

Given the perceived assault on renewable energy schemes over the past few years there is a feeling in the industry that now that entry into the FIT scheme has been significantly reduced the Government is seeking further savings by looking for generating stations to remove from the scheme on technicalities, and this is causing a level of anxiety for some holding renewable generation assets. Where it was once the view that, having achieved full accreditation, an investment was safe, this feeling of long term security is currently under threat.

It is hoped by many that these audits are simply looking for obvious abusers of the scheme, however given the history of the renewables obligation and FIT schemes there is certainly a fear that this is an attempt to remove as many as possible from the scheme.  The underlying rationale for these audits will become apparent in time, however we would be surprised if at least a few of these audit outcomes did not end up before the courts.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For more information please contact Jonathan Green on 01332 818 785 or by email on: jng@prospectlaw.co.uk

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SAUDI ARABIA INVITES EXPRESSIONS OF INTEREST FOR DEVELOPMENT OF TWO 50MW PV FARMS

The state owned Saudi Arabian electricity company has announced two tenders for the development of PV farms, each one to be 50Mw.

Although the contracts are sizeable, the announcement marks a significant scaling back of the Kingdom’s original plan to develop 41,000 megawatts. Whereas early targets reached 50%, Renewable sources are now only expected to account for about 10% of the Kingdom’s total power capacity. However, even this represents a large development programme still thought to be 9,500Mw. The Kingdom is now expecting that an increased output of natural gas will help cut its reliance on crude oil.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

We have been involved in the development of both nuclear and renewable power in the Kingdom for many years and would be happy to discuss this tender with any party that is interested in bidding for it. For further information please contact Edward de la Billiere on edlb@prospectlaw.co.uk

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SOLAR POWER IN THE MIDDLE EAST AND NORTH AFRICA: WHAT FUTURE DOES IT HAVE? PART II

A recent article by Stratfor, A Bright Future for Solar Power in the Middle East, assessed the future of solar power in the Middle East and North Africa, and offered guidance to those seeking to invest in the market. We have been following the development of the PV sector in the region and agree with much of Stratfor’s comment. With permission, we have published some of their main points below, adding our own views.

To read Part I, which assessed the future of Solar Power in Jordan, Egypt and Morocco, click here.

Saudi Arabia

Saudi Arabia relies on oil for electricity production, and it faces rising domestic demand for electricity at a time when low oil prices have put significant financial strain on the government. Its domestic fuel consumption is following an unsustainable trend and the need to wean itself off oil is ever growing.

Under current goals, renewables would account for 8 percent of electricity production by 2020 and 15 percent by 2030, with solar power accounting for the majority of that increase. In the past, however, Saudi Arabia has lengthened the timelines for such targets. The Kingdom also has ambitious nuclear energy plans, which we have been involved in, and aims to remain an ‘energy exporter’ post oil by developing and then exporting its own solar and nuclear technologies.

Saudi company ACWA Power is involved in multiple projects in the region (Morocco and Jordan) and farther away (South Africa and Turkey). ACWA Power has gained a regional reputation as having sufficient economies of scale to underbid other major solar power firms, mostly Western or East Asian companies. This helped ACWA Power win large bids such as the first phase of Morocco’s Noor plant and the Mohammed bin Rashid solar park in the United Arab Emirates. Saudi Arabian Oil Co., the national oil company, has even expressed interest in developing solar export capability. There are also plans to add solar technology production facilities.

The United Arab Emirates

The UAE, meanwhile, has positioned itself as a renewable energy financier and development hub. It is the home of the International Renewable Energy Agency, and hosts important conferences focused on both renewable and non-renewable energy. Furthermore, it has used its ample hydrocarbon largesse to develop unique large and small-scale renewable projects in ways that less resource-rich countries such as Morocco, Jordan and Egypt cannot match. The United Arab Emirates has established itself as a regional leader in solar power in part because of its greater ability to adopt the technology (both domestically and through partnerships with other countries) and to fund projects throughout the world. Masdar, the country’s renewable energy arm, is connected with the Mubadala Development Co., one of the country’s smaller sovereign wealth funds. Masdar is involved in projects throughout the Middle East, Africa, South America and Europe and on islands in the Pacific.

The UAE has shown a similar aptitude for new technologies and flexibility in working with international partners to have the foremost nuclear energy programme in the region, with the first nuclear power station due to commence generation this year, although a delay is looking likely.

Algeria

Algeria is a leading natural gas producer, and has ambitious plans to follow a similar path with solar energy. Renewable power installations totalling 22 gigawatts of capacity — 13 gigawatts of that solar — are proposed to go online by 2030. That is enough power to meet nearly a quarter of domestic needs while still reserving a significant portion for exports. However, the issue of insufficient energy storage, which is a barrier to incorporating large amounts of variable renewable power worldwide, will require substantial research and investment first. Energy storage is a major issue that we have advised on but which is yet to be cracked.

Algeria will require foreign investment and cooperation to meet its grand plans. While Algeria is more stable than some of its neighbours, such as Libya, its government is in a slow leadership transition and the risk of instability caused by protests relating to development and distribution of energy resources is high. Nonetheless, the country has made strides toward attracting the necessary investment to build out its solar capacity. With over 250 megawatts of capacity installed in 2015 and work occurring at additional sites in 2016, Algeria is moving toward its target of 15 percent of electricity being generated by solar by 2020.

Summary

Overall the region will undoubtedly install more renewable energy installations in the coming years. However, there are and will continue to be concerns for those wanting to build, own and operate systems in the region. There are lesser risks for those supplying renewable technologies and those seeking to operate purely as EPC contractors, particularly with the involvement of the World Bank in countries such as Jordan.

Introduction to Prospect Energy and Prospect Law

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.          

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally. 

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For more information please contact Edward de la Billiere on 01332 818 785 or by email on: edlb@prospectlaw.co.uk.

For a PDF of this blog click here

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SOLAR POWER IN THE MIDDLE EAST AND NORTH AFRICA: WHAT FUTURE DOES IT HAVE? PART I

A recent article by Stratfor, A Bright Future for Solar Power in the Middle East, assessed the future of solar power in the Middle East and North Africa, and offered guidance to those seeking to invest in the market. We have been following the development of the PV sector in the region and agree with much of Stratfor’s comment. With permission, we have published some of their main points below, adding our own views.

Summary
The Middle East might seem like a natural hotspot for solar energy. However, despite good sunlight levels, many obstacles continue to prevent widespread deployment, including natural issues (the effect of sand on solar panels), political stability and land rights.

Jordan
Jordan imports 92% of its energy, and energy imports account for around 16% of the nation’s GDP.

In 2011 and 2012, disruptions to natural gas supplies from Egypt caused Jordan to deplete its energy reserves entirely. The problem arose again in 2013, when oil imports from Iraq were interrupted. Uncertain energy supplies have the potential to stoke unrest in Jordan, where energy costs are heavily subsidized by the monarchy. After all, an erratic domestic electricity supply has aggravated social upheaval in nearby Lebanon, Iraq and Egypt.

Jordan aims to produce 20% of its energy from renewables by 2018, and we have advised on plans to develop nuclear power stations. Numerous solar projects, large and small, are underway, ranging from panels on the rooftops of homes to large solar parks with 200-megawatt capacities. Jordan has simplified the bidding process for renewable energy projects, attracting companies from around the world in the process. The European Bank for Reconstruction and Development is actively involved in supporting Jordan’s renewables programme and Public private partnerships will be required to help achieve the nation’s targets.

Egypt
The threat of social unrest in Egypt is more potent than in many other countries in the region. Its massive population creates an enormous energy demand, which may strain the government’s budget but also open up opportunities to invest in technologies to meet the growing need.

President Abdel Fattah al-Sisi’s reforms have attracted renewed investment in the natural gas sector, with projects such as Eni’s Zohr natural gas field being fast-tracked.

Improved natural gas production might help achieve a more consistent supply of electricity, but with demand expected to climb, there is room for additional forms of power generation. Recent agreements with Japan and South Korea to develop solar power and associated projects indicate that Egypt is looking beyond traditional relationships to further the renewables energy sector, though regional players such as Saudi Arabia and the United Arab Emirates are still active investors and there is continued interest from Europe.

Morocco
Morocco imports most of its energy — about 90 percent. The relatively stable nation is also looking to renewables, especially solar power, to create a cheaper, more secure energy supply. Morocco has set a lofty goal: to have renewables account for half its electricity production by 2025 (solar would satisfy about a third of the demand), and the nation even aims to become an electricity exporter.

But Morocco is taking the idea a step further by building the world’s largest power plant using concentrated solar technology. The first phase of the project, the Noor Solar Complex near the city of Ouarzazate, opened earlier this year.

Of course, Morocco’s projects will inevitably require large tenders and international investment, rather than participation from domestic companies.

Introduction to Prospect Energy and Prospect Law

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

For more information please contact Edward de la Billiere on 01332 818 785 or by email on: edlb@prospectlaw.co.uk.

Part II will assess the future of solar power in Algeria, Saudi Arabia and the UAE.

For a PDF of this blog click here

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NEW SUPPORT FOR SOLAR FUELS GROWTH IN FOREIGN MARKETS

Whilst the true fallout from U.K. Governments FiT cuts is yet to rear its ugly head, capital investors and developers plan their next move into new foreign markets.

During the recent COP21 summit, India was heavily criticised for its part in being the third largest CO2 emitting country out of the 195 attendees. Bringing light to 100% of its 1.27billion population, whilst modernising its manufacturing economy; that for years has been driven by domestic coal reserves, has been the harsh reality facing Prime Minister Narendra Modi since entering office in May 2014. India is also faced with developing its electrical infrastructure, by making available an additional 15GW of electricity per annum over the next 30 years to keep up with expected demand.

One of the largest clean energy sources forecast to rid India of its coal consumption is solar energy. The Indian Government have recently unveiled their desire to implement 100GW of solar capacity by April 2022. Well established industry players like SunEdison, who recently withdrew its presence in the U.K., leading to the administration of Leicester based Mark Group, are already well established within the Indian solar market. India had already installed approximately 4.68GW of solar power capacity at the end of 2015. The recent announcement of a new $770million subsidy support scheme for rooftop solar will also certainly aid India in achieving its goals.

Across the pond, U.S. Congress have also passed the final bill extending Investment Tax Credits (ITC) for solar until 2022. The credit which is currently set at 30% of the value of a project, has been extended for both commercial and domestic installations at its current level through 2019 before falling to 10% by 2022. This announcement was most welcomed by developers rushing to complete their projects and qualify for the support scheme, which was set to end later this year. After 2022, these tax credits will no longer be available to domestic installations, but will remain at 10% for commercial installations.

As panel prices continue to fall, new tax break provisions are anticipated to give rise to $1.25 trillion of additional capital. Developers will continue to extend their market presence in states that have not yet exploited their full solar potential. These funds will continue to improve the technology across the board. Deployment figures show that 7.4GW were installed in 2015, eclipsing the 6.3GW record set in 2014. Yet leading electricity market analyst GTM Research anticipates 2016 to reach new heights by installing more than double with approximately 15.4GW of new capacity coming online. Figures released by The Solar Foundation also align with these trends, with employment within the sector soaring by approximately 125% since 2010. One in every eighty-three jobs created in the U.S. over the last 12 months was associated with the solar industry, taking the total to a staggering 210,000 employees. The extension to the tax credits is estimated to take these employment figures to over 420,000 by 2020.

Solar deployment looks set to take its next step in some of the world’s largest and advancing economies on the back of new commitments following the COP21 summit. Will the U.K. miss out on this prime opportunity to exploit its abundance of natural clean-energy resources?

Adam Payne is a technical consultant for Prospect Energy Ltd. His background is predominately in solar deployment throughout the UK having worked on the development of 76MW of ground-mounted solar assets to date.

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

This article remains the copyright property of Prospect Law and Prospect Energy and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Energy.

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CASE CONCERNING RENEWABLES OBLIGATION SCHEME FOR LARGE SCALE SOLAR COMES INTO THE UK COURT OF APPEAL ON 2 FEBRUARY

This article is intended to provide a summary of the background to and issues at stake in the case of Solar Century Holdings Limited, Lark Energy & Others versus the Secretary of State for Energy and Climate Change in which Prospect Law represents the appellant solar companies. The case is due to be heard by the Court of Appeal on 2 February 2016 and, whichever way the judgment goes, it is likely to have implications for the conduct of UK government policy relating to subsidy schemes for renewable energy installations and for the future of the UK’s solar industry.

The History of the Case

1. This appeal concerns a Government subsidy scheme, the Renewables Obligation (“RO”) for incentivising large scale renewable electricity generation, including solar PV
(photovoltaic) projects, in the UK. Under this scheme qualifying projects are granted certificates (“ROCs”) which are sold to generate income in addition to the sale price of the electricity.

2. The appellants are all UK solar industry businesses developing solar PV projects in the UK that would ordinarily be supported by the RO Scheme.

3. On 13 May 2014 the Department of Energy and Climate Change (“DECC”) released a consultation paper which proposed to close the RO to solar PV projects over 5MW in size (“large-scale solar”) on 31 March 2015. Before this consultation the scheme was due to close to all projects on 31 March 2017 – i.e. the proposal was to close the scheme for large-scale solar 2 years early.

4. The main controversy of this consultation was that the notice given was unreasonably short (9 months from the consultation – where most large-scale solar projects have a longer development time than this), and that only projects that met certain arbitrary ‘grace period’criteria as of the date of the consultation would get extra time to deliver. Any new legislation introducing such a closure (following the Government decision on the issue, which came out on 2 October 2014 – 6 months before the closure) would have a back-dated effect on projects (i.e. would have a retrospective effect).

5. Owing to the potentially substantial investment at risk on projects already under development the appellants issued a claim for Judicial Review challenging the legality of the consultation.

The Decision of the High Court

6. The Judicial Review was heard before Mr Justice Green in the High Court in June 2014, with the decision of the Court released in November 2014 ([2014] EWHC 3677 (Admin)).

7. The Judge granted permission for the Judicial Review to be heard, but dismissed the application. The Judge acknowledged the “need for operators to have a secure and stable legal and investment environment in which to plan”, that “projects can involve a significant lead time from first investment to accreditation” and that “clear and repeated representations were made by Government to the effect that the scheme would remain in place until 2017”.

8. Nevertheless, the Judge also ruled that the Levy Control Framework (“LCF”), the Government’s self-imposed cap on funding for renewable energy schemes, “acts as an all pervasive proviso or caveat to any exercise of the statutory power” and that whilst the proposed changes included “a degree of retrospectivity” this was fair in the circumstances.

9. The over-arching rationale being, put simply, that the Government’s justification of defending the LCF cap levels was important enough to make the approach of the Government lawful.

10. The appellants do not agree with this, and have appealed this decision.

The Points on Appeal

11. Permission to appeal was granted by Lord Justice Bean of the Court of Appeal in early 2015.

12. The appellants’ main argument is that the LCF clearly states that investor confidence is paramount to the operating of renewables subsidy schemes and that retrospective changes will not be made to such schemes. With such statements and assurances clearly set out in the LCF it is difficult to believe that the LCF should be interpreted in the solar development and investment community as “an all pervasive proviso”.

13. There are also arguments in relation to the purpose of the legislation introduced to allow the closure of the RO and that the test for the lawfulness of retrospectivity in secondary legislation (i.e. a statutory instrument) is not whether such changes are ‘fair’, but whether the Secretary of State has the power to make such retrospective changes.

14. The appeal is due to be heard by the Court of Appeal on 2 February 2016.

The Wider Implications

15. We have already seen further DECC consultations with similar retrospectivity in relation to (1) further changes to support under the RO and (2) changes to the Feed-in Tariff (“FIT”) scheme, a sister scheme to the RO that support smaller renewables projects. In each changes are proposed, usually at short notice, with some aspects to take effect from the date of the consultation, not the date of the new legislation, all justified by seeking to protect the self-imposed LCF caps. These ‘consultations’ force those in the renewables sector to take action on the basis of these consultations as if they are final decisions. According to the latest Ernst and Young Renewable Energy Country Attractiveness Index reports, this is very damaging to investor confidence in the UK market.

16. If it is held that budgetary concerns override legitimate expectations, protection from retrospectivity and other such concepts that investors rely upon to allow them to make investment decisions, then the implications could extend even further than just the renewable energy industry.

This article is not intended to constitute legal advice and Prospect Law and Prospect Energy accepts no responsibility for loss or damage incurred as a result of reliance on its content. Specific legal advice should be taken in relation to any issues or concerns of readers which are raised by this article.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

For a PDF of this blog click here

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CHANGES ON THE HORIZON FOR UK SOLAR PART 2:

This is the second of three articles by Adam Payne which are intended to summarise the recent overhaul of the mechanics that have structured government support for the UK solar industry in recent years.

In the previous article I outlined how changes to subsidy support for the UK solar industry may undermine the fundamentals of last month’s climate change summit in Paris. In this article I delve into the detail of the consultation outcome, and In my third article I will consider the long term future prospects of the UK solar market.

The long awaited outcome of the Government’s FIT consultation was released on 17th December 2015. The consultation, which commenced on 27th August 2015, set out to review the level of support offered by the FIT scheme.

The principle argument behind the review has stemmed from the success of solar deployment in the UK and the uptake of the Government’s subsidy schemes.

Solar deployment throughout the UK has rapidly developed over the past 5 years and the Government anticipates what it considers to be an unacceptable over spend on the levied scheme which, in turn, will be passed onto consumer energy bill prices.

The cost of the increase in consumer energy bills is widely debated. However, a conservative estimate would indicate a potential increase of approximately £7. This sum, and the 65% decrease in subsidy levels that has now been imposed by DECC, should perhaps be set against the potential value to the country of securing a clean and secure energy source for the long-term future and how this interplays with our commitments on climate change objectives, as well as the job security of 25,000 people who are, or have been until recently, directly associated with the UK solar industry.

The headline points of the consultation response might usefully be summarized as follows:

–           from 15th January 2016, the maximum overall budget for FITs will be reduced to a cap of £100m per annum across all technologies,

–           all new applications applying for FITs will be subject to a new system of caps,

–           new tariffs for solar outline 0.87p/kW for stand-alone projects, and

–           <10kW system installations will receive 4.39p/kW, down from the previous 12.03p/kW.

Under the new cap system, the Government has limited deployment to a certain number of installation sizes that could come forward per quarter. Provisions have been made for just 5 stand-alone projects to be eligible for FITs per quarter from Q1 2016 to Q1 2019.

One of the most significant changes to come out of the consultation was the decision to remove the ability to pre-accredit projects under the scheme. The rationale behind this development was again, it appears, to stem the then current strong deployment progress, but the move has been particularly detrimental to investor confidence since there is no longer any guarantee of obtaining accreditation.

To further confuse the industry the Government has now decided to reinstate the process of pre-accreditation from 8th February 2016 for solar projects larger than 50kW under the new caps. The validity period, i.e. the time in which the project must be built, energised and pre-accreditation converted to a ROO-FIT application (full accreditation), is only 6 months.

This is, in my view, an alarmingly narrow window of time bearing in mind the entire planning application and decision making process (and its inherent unpredictability, as well as expense), not to mention the 90 day turn around for ENA applications to Distribution Network Operators.

Developers across the country have since scrambled to get their pipelines completed.  As much as 3.9GW of solar was installed during 2015, eclipsing the previous record of 2.5GW  in 2014.

In the third and final article of the series, I will attempt to outline the direction in which the solar market could go in spite of the downturn in investment and investor confidence currently being experienced.

Adam Payne is a technical consultant for Prospect Energy Ltd. His background is predominately in solar deployment throughout the UK having worked on the development of 76MW of ground-mounted solar assets to date.

This blog is not intended to constitute legal advice. We accept no responsibility for loss or damage incurred as a result of reliance on its content.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resource projects in the UK and internationally.

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CHANGES ON THE HORIZON FOR UK SOLAR PART I:

This is the first of three articles by Adam Payne which are intended to summarise the recent complete overhaul of the mechanics that have structured government support for the UK solar industry. Throughout the series, we will discuss the fallout from the Government’s Feed-in-Tariff consultation before finally anticipating the market’s longevity.

We start this series on the back of last month’s United Nations Climate Change summit in Paris. An array of environmentalists, political leaders and scientists assembled in the French capital representing the 195 attending nations. Mitigating global warming and becoming rapidly less dependent on fossil fuel consumption is clearly now the central challenge facing the international community. The ambitiousness of these targets will be key in achieving the Paris summit agreement as countries already suffering from long-term drought and sea-level rise call for the most aggressive targets to be set.

Solar deployment will no doubt play a crucial role in meeting targets. Yet the actions of the UK Government’s Department for Energy and Climate Change (DECC) seems to go against the objective of limiting long-term global warming to 2°C.

Drastic policy change, headed by DECC Secretary of State Amber Rudd, has left much of the solar industry confounded into rethinking its entire resource and capital expenditure beyond March FY16. The curtain has already been drawn on several well-known utility companies such as Mark Group and Climate Energy, with several more on the brink of closure as shattered investor confidence leads to a search for new markets. Meanwhile, the US Congress’s approval to extend the $1.14 trillion dollar tax credits deal has boosted the confidence and stock prices of US utility companies, drawing further questioning of the UK Government’s decision making processes on renewable energy policy.

Protective legislation and investments also continue to pour into the nuclear, oil and gas industries. Government figures suggest that tax breaks announced in 2015 for crude oil production in the North Sea will cost taxpayers a further £1.7bn by 2020. How much of a future do finite fuels have in an already saturated market? And why is the UK the only G7 country where such subsidies are actually increasing.

Everyone understands the importance of keeping energy bills low for “hard-working” households and businesses, but to justify the complete overhaul of subsidy mechanics for a technology set to be self-sufficient by 2020 seems surprising. Is jeopardising the livelihood of 20,000 employees in the solar sector really worth an average annual household saving of just £7? Drawing the curtain on a thriving industry with falling costs and improving technologies seems to undermine the whole objective of last month’s summit.

Our next article will break down the specifics of the FIT consultation outcome.

Adam Payne is a technical consultant for Prospect Energy Ltd. His background is predominantly in solar deployment throughout the UK having worked on the development of 76MWp of ground-mounted solar assets to date.

Prospect Law and Prospect Energy provide a unique combination of legal and technical advisory services for clients involved in energy, infrastructure and natural resources projects in the UK and internationally.

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CUADRILLA’S FRACKING APPLICATIONS REFUSED BY LANCASHIRE COUNTY COUNCIL

Ashley Bowes, Prospect Law

For nearly a year and a half Lancashire County Council Development Control Committee heard extensive evidence from its own officers, the public and the applicant at a series of public hearings concerning two planning applications. Cuadrilla had sought permission for the construction and operation of four wells, drilled from a single large well-pad, with each well being subjected to hydraulic fracturing (fracking). The operation was expected to run 24 hours a day with fracking occurring for two months, followed by a three month initial period to test the flow of hydrocarbons (gas) and then 18-24 months of extended flow testing. They represented the largest appraisal of fracking in the UK.

The first site, at Roseacre Wood, was recommended for refusal on the grounds of its transport impact. The second site, at Preston New Road, although initially also recommended for refusal, was subsequently recommended for approval following further noise evidence from the applicant.

The scene was therefore set for a tense development control meeting on 23-24 June. On 24 June a motion to refuse the application was moved and seconded but, following an adjournment, was defeated on the Chairman’s casting vote. It emerged that in the adjournment the Council received telephone advice from David Manley QC to the effect that the Council would be acting unreasonably to refuse the application and would expose itself to costs at appeal. A subsequent motion was passed to make that legal advice public.

In response to which, Friends of the Earth sought advice from Richard Harwood QC and the Preston New Road Action Group sought advice from Ashley Bowes. Both barristers’ advice concluded that there were grounds to refuse the application on the evidence before the Committee.

At its reconvened meeting on 29 June, a motion to refuse the application was passed on Ashley Bowes’ suggested reasons, which read as follows:

“The development would cause an unacceptable adverse impact on the landscape, arising from the drilling equipment, noise mitigation equipment, storage plant, flare stacks and other associated development. The combined effect would result in an adverse urbanising effect on the open and rural character of the landscape and visual amenity of local residents contrary to policies DM2 Lancashire Waste and Minerals Plan and Policy EP11 Fylde Local Plan.”

“The development would cause an unacceptable noise impact resulting in a detrimental impact on the amenity of local residents which could not be adequately controlled by condition contrary to policies DM2 Lancashire Waste and Minerals Plan and Policy EP27 Fylde Local Plan.”

Cuadrilla has six months in which to decide whether to appeal. If Cuadrilla does choose to appeal against the refusals a public inquiry is highly likely, at which the Inspector will have to grapple with the competing expert evidence (especially on noise impact).

It is also likely that any appeal will be recovered by the Secretary of State for determination, in order to give a determinative policy steer for future applications.

Reacting to the decision the UK Onshore Oil and Gas urged the Government to take a “strategic review” of how the planning system deals with these applications. However, the Prime Minister appeared not to signal any imminent change to the system, responding at Prime Minister’s Questions on 1 July that: “those decisions must be made by local authorities in the proper way, under the planning regime we have”.

 

Introduction to Prospect Law and Ashley Bowes

Prospect Law Ltd is an energy specialist UK law firm which is based in London and the Midlands. Prospect Energy Ltd is its sister company providing technical expertise. The two firms provide advice on energy development projects and energy related litigation concerning shale gas, nuclear and renewable energy schemes for clients in the UK and internationally.

Ashley Bowes is a barrister who specialises in planning and environmental law matters at planning appeals and in statutory challenges and judicial review cases in the High Court. He is involved in energy related development projects around the UK.

 

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For more information, please contact Edmund Robb on 07930 397531, or by email on: er@prospectlaw.co.uk.