decision

Secretary of State for Energy and Climate Change v. Friends of the Earth - decision

Litigation

Sabin

Sabin Litigation

Filing Year For Action

Individuals, solar installation firms, and community organizations coordinated by Friends of the Earth filed legal challenges when the Secretary of State for Energy and Climate Change proposed a downward revision in the rate at which recipients of a feed-in-tariff (FIT) for solar photovoltaic (PV) would be compensated. Their challenge focused not on the rate reduction per se, but its retroactive implementation for generators who installed solar PV facilities after December 2011 but before April 2012. That is, the suit challenged the Secretary’s proposal that those generators begin receiving reduced compensation for electricity generation when the new, lower FIT rate took effect on April 1, 2012. 

Some background on the scheme is helpful for understanding the Secretary’s reasons for seeking to push through a rate reduction hastily. The scheme was launched in April 2010 to encourage “small-scale low-carbon generators” to develop more electricity generating capacity using solar PV, wind, and biomass. Electricity suppliers paid the cost of the FIT and passed it on to electricity consumers. Twice the expected volume of new solar PV capacity was installed over the scheme’s first 18 months. In light of this and of falling solar PV costs, the Secretary undertook a fast-tracked review of the FIT rate and proposed to revise it downward starting in April 2012, and to compensate all solar PV generators who installed after December 2011 at the reduced rate from April 2012 on. When the review began, there was a surge in solar PV installations, presumably by people who recognized that the window for securing an advantageous FIT rate would soon close. The Secretary’s proposed rate reduction thus sought to address both to the unexpectedly high volume of solar PV installation overall and to the surge in installations in advance of the higher rate’s sunset.

The appellate court upheld the decision and the reasoning of the lower court, which had reviewed the purpose of the Energy Act 2008 on which the FIT scheme was based and the scope of discretion afforded to the Secretary under that Act. The appellate decision explained that rates fixed for a 25-year period starting with the first day of generation are basic to the FIT scheme, and that the scheme makes no provision for adjusting those rates in the way proposed by the Secretary. FIT rates, the court concluded, may be adjusted in prospect, making it permissible for the Secretary to reduce rates for installations coming online after April 1, 2012, but not in retrospect.