Renewables

Picture of a megaphoneIt was always going to be light on the detail but what are we to read into the absence of the pledge to “end new subsidy for onshore wind” from the speech? And indeed Amber Rudd’s blog of the same day.

Could it be as simple as its implementation does not require primary legislation? This is possible of course, and DECC said yesterday it would announce measures to deliver this pledge separately. However, could it be that DECC is facing a new energy ‘trilemma’ – intense lobbying from the industry, intense political pressure from north of the border and legal risk in all directions.

The first two are plain to see. Yet DECC must also be wrestling with the question of just how to implement the onshore wind pledge. There are of course three subsidy regimes not one – FIT, ROCs and CfDs. The RO is closing in 2017 – can it be brought to an end early? DECC would be sure to be mired in legal challenges if it tried to close the RO early. The Conservatives have already signalled that the policy is really aimed at larger windfarms so FIT may survive.

Which leaves the CfD. How would DECC implement the policy for CfDs? The Energy Act 2013 – s24 – requires DECC to consult with industry and the devolved administrations before making CfD regulations. Regulations have been in force since last year and of course they permit onshore wind developers to apply for CfDs. The obvious way to implement the policy would be to amend those regulations to designate onshore wind an ‘excluded application’. DECC could however potentially try to use the ministerial powers under the budget notice provisions to set a strike price of say £0 for onshore wind, or to impose a ‘maxima’ of 0MW to be allocated to onshore wind. The powers to set administrative strike prices and maxima were not intended to be used for the purpose of completely excluding a technology and, therefore if DECC tries this, I wouldn’t be betting against a judicial review.

So where does that leave DECC?

  • Primary legislation? Not in the Queen’s speech so presumably ruled out
  • Ministerial powers under the budget notice provisions? This risks judicial review
  • Consult with the devolved administration and industry on changes to the regulations?

Consulting with the Scottish Government won’t be easy. The industry will have plenty to say too. The law says a consultation exercise must be genuine – you can’t just go through the motions. If, after the consultation, DECC proposes to implement the policy without change, it will almost inevitably invite legal challenge.

The officials at DECC must be drawing straws to see who gets to steer this policy through to implementation…

If you want more information on the Queen’s Speech more widely try Charles Livingstone’s blog here.

Keith Patterson

Partner at Brodies LLP
Keith is a Partner in the Energy & Infrastructure Team and Co-Head of the Renewables Group. He advises developers, investors, lenders and public sector bodies on developing and financing low carbon projects, as well as M&A deals in the sector.
Keith Patterson

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