EXCLUSIVE: Empowering Wind threatens to sue regulator, citing “flaws” in feed-in tariff law
The developer of a flagship wind turbine project at Middlesbrough Football Club (MFC) is threatening to sue Ofgem for taking an “unacceptably” long time to confirm feed-in tariff payments.
The chief executive of Empowering Wind MFC, which is installing a 1.5MW turbine at Boro’s Riverside Stadium, claims errors made by Ofgem have effectively forced the project onto a 26 per cent lower feed-in tariff than originally planned, pushing up costs for the project and damaging the company’s reputation as the first installer of a wind turbine at a European football club.
Ofgem denies it is to blame for the delays, instead accusing Empowering Wind of failing to submit the correct paperwork, and it has refused to allow the company any flexibility in extending the period during which it can secure the higher feed-in tariff rate.
However, the case raises questions about whether the feed-in tariff application system is helping or hindering the UK’s efforts to meet its renewable energy targets, and has bolstered industry calls for the Department of Energy and Climate Change (DECC) to reform aspects of its popular feed-in tariff scheme.
Currently, renewable energy developers can apply for “pre-accreditation” to the feed-in tariff scheme before they expect to switch on their machines. Pre-accreditation status gives developers certainty that they will be protected from any cuts to the subsidy rate for 12 months of the construction phase.
However, in reality developers can be left with significantly less than 12 months to complete projects because the validity period starts on the day Ofgem receives the application for pre-accreditation, rather than when the project is approved. Any delays to approval can hold up entire projects because many firms cannot order or install equipment until they have achieved pre-accreditation status. Delays are most likely in the run up to a feed-in tariff cut, when Ofgem typically experiences a surge in applications.
This is the context in which Paul Millinder, chief executive of Empowering Wind, applied for a feed-in tariff of 9.79 pence per kilowatt hour for the Boro wind turbine in December 2013.
Ofgem did not grant pre-accreditation status until 30 May 2014, six months later. But by that time it was too late for Empowering Wind to procure and install the turbine by 15 December – when the validity period for pre-accreditation will end. As a result, Millinder says he will have to wait until December to apply for the feed-in tariff again, which now stands at 7.24p/KWh – 26 per cent lower than the rate he first applied for.
Millinder has repeatedly asked Ofgem for a two month extension to his validity period in order to meet the deadline, but Ofgem says there is no provision in the law that allows for this.
As a result, Millinder is planning to sue Ofgem and DECC, seeking compensation for the losses the project is expected to incur.
Millinder told BusinessGreen he believes the delay was caused by “maladministration”, claiming Ofgem had failed to realise that he had provided the right paperwork from the outset. “The project now stands to lose 30 per cent of the tariff it would had otherwise have gained had it not been for unacceptable delays and numerous omissions by Ofgem,” he said. “My further findings following legal negotiations and investigation, lead me to discover that my case is far from isolated and therefore this presents potential for a joint legal action.”
In internal Ofgem emails seen by BusinessGreen, employees admit that around six other projects were hit by similar delays last year. In the emails, released under a Freedom of Information request, one employee says they are ”a bit worried about saying straight out that there are 6 other cases that might be affected”. They add: “Hopefully we won’t be asked!”
Ofgem has publicly refused to respond to questions about the project, arguing it is unable to comment on a case that could shortly be subjected to legal proceedings. A spokeswoman said only that it administers the feed-in-tariff scheme in line with legislation set by DECC and that it has approved more than 1,300 applications to date.
The row centres on a dispute over the paperwork submitted by Empowering Wind. In March, four months after Millinder’s initial application, Ofgem issued a “minded to refuse notice”, arguing his application failed to prove that he had secured a grid connection prior to making his application – a prerequisite of approval. However, Millinder was able to prove he had met the required commitments and Ofgem reversed its decision, finally giving approval in May.
The crux of the case seem to rest on a document Ofgem asks developers to provide in its feed-in tariff guidance booklet. However, the feed-in tariff legislation does not demand this evidence so Millinder claims he was not required to provide it.
The emails also reveal Ofgem apologised to Millinder during the six month wait. In April, after he had received no contact from the regulator for six months, a senior member of staff admitted Millinder had suffered “unacceptable delays” that were outside its expected timescales for processing applications.
In addition to the threat of legal action, Millinder has also made an official complaint to the Department of Energy and Climate Change (DECC) calling for the feed in tarrif legislation to be amended. He argues the law at present is “fundamentally flawed” because the validity period starts on the day an application is submitted rather than the day Ofgem makes its decision. “Ofgem can take as long as it likes to refuse an application, ‘invalidating the Validity Period’ and causing the affected applicant’s financial loss on varying levels,” he added.
A spokeswoman for DECC told BusinessGreen that it was “aware of Mr Millinder’s concerns and are currently in correspondence with him”.
Industry insiders say the case clearly raises questions about whether Ofgem has sufficient resources to deal with the surge in applications that occurs around the time the feed-in tariff rate is reduced.
DECC is understood to be currently examining the process for pre-accreditation in a wider review of feed-in tariff rules.
Louisa Coursey, small and medium wind development manager for RenewableUK, told BusinessGreen she believed it would be fairer if the 12-month validity period began on the day of approval, as Millinder is arguing.
“There are examples where developers have suffered from similar situations [to Mr Millinder] and are consequently struggling to install their turbine within the time limitations imposed by the pre-accreditation process,” she said. “It’s creating an additional barrier to the successful installation of turbine projects.
“Ofgem have limited resources and this is causing delays in the time taken to approve applications. Additional funding from DECC or a change to the pre-accreditation process is required in order to solve this situation.”