The withdrawal of an already granted ROC accreditation was once regarded as a remote risk. Not any more. In the Kelly Green case, the court upheld an Ofgem decision to withdraw the ROC accreditation of a solar project.
The UK's energy regulator, Ofgem, has begun a new statistical audit programme of randomly selected accredited renewable energy projects. The new programme is intended to significantly increase the number of audits being carried and thereby assure the regulator that the information provided for accreditation and Renewable Obligation (RO) claims is accurate.
The significance of accreditation is that it enables Ofgem to issue Renewables Obligation Certificates ('ROCs') to renewable generators, for electricity they generate from renewable sources. ROCs enable generators of electricity to 'top-up' the income they obtain from sales of electricity to make up the shortfall from commercial sales required to justify the investment in renewably generated energy. While much renewable energy today is less expensive than in the past, the continued issuance of ROCs is vital to owners and funders of ROC projects. Many billions of pounds have been invested in ROC-backed projects.
The audits are being conducted by an independent EPC company. Following a site visit, the auditor drafts a report detailing its assessment along with any findings to be addressed and outstanding information to be provided. It then submits this report to Ofgem. Ofgem will then write to the generator, providing a copy of the report and following up on the auditor's queries.
The generator must satisfy Ofgem of the project's eligibility, including the accuracy and reliability of the information which was provided to obtain the accreditation. The regulator may suspend ROC issue until the audit findings have been addressed. Critically, if Ofgem is not ultimately satisfied with the response, it may withdraw accreditation.
Ofgem has shown a willingness to adopt this drastic step where it forms the view that it has been misled. Moreover, should this happen, the courts may be hesitant to intervene. In March 2021, the English High Court considered a challenge by the owners of a small solar photovoltaic electricity generating station, Kelly Green.[1] Ofgem had withdrawn the accreditation when it concluded that it had been misled about the date when Kelly Green (a solar project) was commissioned. The actual date on which it was commissioned, or capable of commercial operation, took the project outside the period during which an application for ROC accreditation could be made.
The claimants argued that to remove the accreditation was a disproportionate response to an inaccuracy in the commissioning date as submitted to Ofgem. This was particularly the case, in the claimants' view, since there was the possibility for a grace period under the statutory framework which could forgive the delay in commencing operation.
The High Court found that it could not be disputed that the revocation of accreditation was in accordance with the law. Ofgem had satisfied itself of the single criterion required: it had reason to believe that the information on which the decision to grant accreditation was based was incorrect "in material particulars". The Court did not see relevance in the availability of the grace period since the claimants had not applied for it in line with the scheme's rules and procedures.
Critically, the judgment shows a willingness to support Ofgem in taking a hard line towards inaccuracies. As Sir Duncan Ouseley concluded:
"The position of Ofgem as recipient of information from applicants for accreditation, much of which it has to take on trust, and cannot independently check without significant investigation is important, especially when it is the provider of that information which is seeking to access very significant sums of money from the public. The declarations made have to be taken seriously. The integrity of the ROS, and public acceptance of the cost, mean that fraud cannot be tolerated." [2]
The court also noted that the purchase of the project by new owners was not a factor that Ofgem needed to take into account in exercising its discretion as to the appropriate remedy. The claimants made the case that they had purchased the project in good faith and on the assumption that the accreditation had been obtained properly. In the court's view, this was a matter for due diligence to be carried out by the buyer and not a reason affecting the decision to remove accreditation.
There are three points which current owners of ROC projects should take from this case. First, the audit process can review all aspects of the accreditation application, in particular all information relating to the fact and date of commissioning. Second, the ROC statutory framework confers a broad discretion on Ofgem and it has displayed a willingness to use the ultimate sanction of withdrawing accreditation. Third, seeking to rely on a change in ownership as a defence to errors in the accreditation application and process will not be successful and may indeed strain relations with Ofgem.
All in all, project owners may wish to carry out their own internal audits on the information they hold from the accreditation process before Ofgem come calling.
[1] Gravis Solar 1 Limited v GEMA [2021] EWHC 490 (Admin)
[2] Ibid at paragraph 79.
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