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U.K. Court Ruling on Solar Subsidies Leaves Incentives for Boom

The U.K. Court of Appeal rejected the government’s bid to rein in subsidies for solar energy ahead of schedule, leaving in place incentive rates that triggered a boom in installations.

A three-judge panel unanimously agreed that the government did not have the powers to make the cuts planned for April 1 effective to projects completed before that date. The government had wanted new rates to come into force for projects finished after Dec. 12 and may now delay that date until March at the earliest.

Developers installed panels with at least 800 megawatts of capacity last year, more than 10 times the previous year’s pace, after a feed-in tariff granting above-market prices for renewable energy took effect in April 2010. Executives from solar companies such as Conergy AG and Good Energy Ltd. said the surge in the U.K. will continue until the cut-off date.

“It looks likely there will be another boom even bigger than the one last quarter as businesses and the public sector reinstate plans that were shelved after the cuts were announced, and others bring forward their projects,” Robert Goss, U.K. head for German installer Conergy, said by e-mail. “It will be solar on steroids for two months.”

Energy Secretary Chris Huhne said the government is seeking the Supreme Court’s permission to appeal in a bid to reduce the pressure on the program’s budget.

“We want to maximize the number of installations that are possible within the available budget rather than use available money to pay a higher tariff to half the number of installations,” Huhne said.

‘Retrospective Effect’

The judges said a cut before reduced rates become effective in April would have a “retrospective effect,” the judgment text shows.

The U.K. government lost an appeal against a court ruling last month that deemed its plan to lower the premium rates paid for solar power ahead of schedule as unlawful.

If not overturned, the ruling means cuts to feed-in tariffs, or fixed premium rates for solar power, will not come into effect before March, almost three months after the government intended. This is likely to allow the boom experienced by the industry in the past year to continue.

The High Court last month ruled that the government made an “unlawful decision” in deciding lower rates would affect projects completed after Dec. 12, before the end of a consultation and the April 1 date set when the program started in early 2010. The government appealed the judgment on Jan. 13.

Solarcentury Holdings Ltd., Homesun Ltd. and the environmental group Friends of the Earth challenged the timing of the cuts after the government announced plans on Oct. 31 to prevent solar demand exceeding its spending limit. It proposed to reduce feed-in tariffs for rooftop installations by as much as 55 percent from the current 43 pence.

‘Investments Are Safe’

“Investors should now be confident in three things,” Homesun Chief Executive Officer Daniel Green said in an interview. “That retrospectivity is never going to happen in this industry so investments are safe, that there’s an extremely high likelihood that the 43 pence will remain until March 3 for all current installations and that the industry is prepared to stand up to the government.”

Last week, the Department for Energy and Climate Change said it planned to make the cuts effective to installations completed after March 3 only if it lost the appeal in an effort to provide some certainty to the industry.

As many as 25,000 jobs and many projects under development had been put at risk by the government’s plan to cut rates early, according to the industry groups.

‘Fudge It’

Almost half of all panels installed last year were built in the last two months of the year as companies and homeowners took advantage of rates fixed for 25 years amid crashing panel prices, according to the energy regulator Ofgem.

The figures compare to the less than 50 megawatts installed during 2010 and the government’s forecast of 832 megawatts by the end of the current spending review in April 2015.

As many as 1.1 gigawatts may have been already installed, the London-based research firm Bloomberg New Energy Finance estimates.

The industry should be able to “fudge it,” not grow, after April if the 21 pence rate proposed in the consultation is confirmed by the government in the next few weeks, according to HomeSun’s chief. He said the industry has been damaged and jobs decimated by the uncertainty created by the government.

“The credibility of the way the feed-in tariff budget is set has been seriously damaged, and the government must reform the tariff to prevent this boom-and-bust situation from happening again,” Juliet Davenport, chief executive of clean energy provider Good Energy, said in an e-mailed statement.

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