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U.K. High Court Rules Solar Subsidy Cut Plans ‘Unlawful’

Dec. 21 (Bloomberg) -- The U.K. High Court ruled that a government plan to cut subsidies for solar energy starting Dec. 12 was “unlawful,” and should be subject to judicial review.

The ruling said the Department of Energy & Climate Change made an “unlawful decision” by proposing cuts to feed-in tariffs for solar power before a consultation with industry about the plan finishes on Dec. 23. He said the decision breached the rules governing consultation exercises and had a “significant” impact on the industry.

Companies including Solarcentury and lobby group Friends of the Earth had challenged the government plan, saying 55 percent cuts to tariffs with only six weeks notice put at risk as many as 29,000 jobs and the future of the U.K. solar industry. U.K. Climate Change Minister Greg Barker said he disagreed with the High Court decision.

“We will be seeking an appeal and hope to secure a hearing as soon as possible,” Barker said in an e-mailed statement today. “Regardless of today’s outcome, the current high tariffs for solar PV are not sustainable and changes need to be made.”

The department started a consultation on feed-in tariffs, or guaranteed premiums for solar energy, on Oct. 31, in an attempt to reduce rates and reflect lower costs for panels and curtail a boom in installations. It decided that the cuts would apply to all projects completed after Dec. 12, about four months earlier than scheduled.

Judicial Review

The ruling paves the way for a judicial review that may force the government to re-open its consultation about the measures, delaying when the proposed cuts to incentives will take effect, according to London-based Solarcentury, the U.K’s largest solar company.

“We encourage the secretary of state to accept the judge’s very clear ruling, not plunge the industry into a further period of uncertainty by considering going to appeal,” Solarcentury Chairman Jeremy Leggett said in an e-mail.

‘Significant’ Opportunity

Moving the reference date by several weeks would be “significant” for companies with projects under development, allowing multiple ones such as council projects to go through, he said.

David Cameron’s Conservative government and the Labour opposition both agreed that subsidies for the industry had to be cut to keep a boom in solar installations from driving up electricity bills.

Earlier in the month, U.K. Energy Secretary Chris Huhne said the reductions are needed because a surge in installations is threatening the 867 million-pound ($1.4 billion) budget allocated for feed-in tariffs through 2015. The tariffs are paid by utilities, which pass the costs to consumers.

There is a 20 percent flexibility on the spending cap according to Treasury rules, Leggett said.

“Although perceived by the industry as a success, this could be but a moral victory,” Ranmali Desilva, solar analyst at Bloomberg New Energy Finance, said by e-mail. “A judicial review would only confuse the issue and delay certainty, should the government be forced to re-issue the consultation.”

The government has until Jan. 4 to appeal today’s decision, though the judge said it’s unlikely there would be grounds for a successful challenge.

“This is a great victory,” Howard Johns, head of the Solar Trade Association, said at the court in London after the decision was handed down. “It’s very unusual for a judicial review to go against the government. The uncertainty is still here, but it gives us hope.”

To contact the reporter on this story: Marc Roca in London at mroca6@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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