Energy Company Exposes Flaws in DECC Feed in Tariff Legislation

Clean Tech Investments Limited, an energy company active in distributed wind power generation, has exposed flaws in the DECC Feed in Tariff legislation and the process of becoming accredited under the Scheme.

Andrew Lindsay, director and head of Corporate Law at Lupton Fawcett Denison Till, solicitors based in Leeds, Sheffield and York, who represents Clean Tech and who is also chair of the West & North Yorkshire Chamber of Commerce states:

“unlike other statutory processes, such as an application for planning permission, or an application to become FCA regulated (whereby the date of approval of an application is the date on which permission is actually granted), the day on which approval is deemed to be granted for the Feed in Tariff, is the day on which the application is received by the authority.”

This presents an illogical position in the context of the Period of Validity and the Eligibility Date and whether the period is indeed valid.  This is because the applicant does not know if or when notification of approval is going to be given, and cannot realistically take action to implement the approval until notification is received.

The FIT Order 2012 provides a Period of Validity from which the applicant must convert its Preliminary Accreditation to Full Accreditation.  The intention of this Period of Validity, is to allow sufficient time for an applicant to order capital equipment and commission its generator(s) etc.  The period is 12 months in the case of a wind turbine generator or 6 months for solar PV.  However, under current FIT legislation, because the Period of Validity commences prior to the Authority making a determination, and as it is not known on which date approval by the Authority might be given (or, indeed, whether it will be given) the applicant is left in a period of uncertainty, likely to cause financial loss.

Financiers of such schemes are aware of the risk and therefore rely on the Authority providing confirmation of FIT Preliminary Accreditation prior to authorising the release of funds required to secure the order for generators and/or capital equipment.

In December 2013, due to what OFGEM described as “a higher than usual volume of applications,” OFGEM took several months to determine some applications.  This consequently shortened the remaining 12 month Period of Validity.  In extreme circumstances, OFGEM could delay notifying the applicant of approval up to, literally, the final day of the Period of Validity.  In those circumstances, the applicant could not possibly order its equipment, receive delivery of it and/or commission the turbines within such a short remaining timescale.  An applicant is also unable to re-apply for Preliminary Accreditation until the Period of Validity had expired.  Consequently, the Tariff the applicant originally expected to receive would potentially be lost, which not only causes uncertainty, but there is also significant potential for financial loss.  This can make the project impossible to finance.

Andrew Lindsay, who can be contacted at andrew.lindsay@lf-dt.com (and on 0113 280 2000), would like to hear from other operators, solicitors or stakeholders in the sector who have been affected by the matters raised above.

 

Leave a Comment