DECC Publishes Outcome of ≤5MW RO Review

18 December 2015


On 17 December 2015 the Department of Energy and Climate Change (DECC) published its decision on the proposal to close the Renewables Obligation (RO) to ≤ 5MW solar PV projects with effect from 1 April 2016.

The decision on closure and grace periods is more-or-less as originally proposed, including a 'significant financial commitment' grace period that applies by reference to the date of the consultation (22 July 2015).

As expected, the decision also includes a banding review for solar PV. However, in a largely unexpected concession to developers, those projects which benefit from 'significant financial commitment' grace period will be subject to a less severe reduction in support than was originally feared.

This article summarises the key outcomes of DECC's decision.

Closure of RO to ≤5MW solar

DECC initially proposed closing the RO to ≤5MW solar PV projects in its consultation of 22 July 2015. DECC proposed that new generating stations (and additional capacity) commissioned after 31 March 2016 would not be eligible for support under the RO. The key driver for this change was to ensure that the Levy Control Framework (LCF) caps are not exceeded.

The Government's decision confirmed its intention that RO should close to ≤5MW solar PV projects as proposed.

Grace Periods

As expected, and in line with the grace periods currently available for ≤5MW solar PV projects, the Government has decided to put in place three grace periods as follows:

Preliminary accreditation

Generating stations that had obtained preliminary accreditation on or before 22 July 2015 (the date DECC launched its consultation) will benefit from a grace period, allowing accreditation at any time on or before 31 March 2017.

Grid delay

This grace period will be available when a grid delay occurs which is beyond the developer's control. Again, projects that qualify will be able to obtain accreditation at any time on or before 31 March 2017. To meet the criteria for this grace period, evidence will need to be submitted to Ofgem as follows:

  1. an accepted grid offer with an estimated connection date no later than 31 March 2016;
  2. a written declaration by the developer that, to the best of its knowledge, the generating station would have been commissioned on or before 31 March 2016 if the connection had been made on or before the estimated grid connection date; and
  3. a letter from the network operator confirming that the delay was not due to any breach of the grid connection agreement by the developer.

Significant Financial Commitment

Finally, and most significantly, generating stations in respect of which "significant financial commitments" were made on or before 22 July 2015 will benefit from a grace period - again until 31 March 2017.

To satisfy that there has been a "significant financial commitment", evidence will need to be submitted to Ofgem as follows:

  1. a grid offer that was accepted prior to 22 July 2015;
  2. a Director's Certificate confirming freehold ownership, lease, option over, agreement for lease or exclusivity over the relevant land as at 22 July 2015; and
  3. confirmation that a planning application had been received by the relevant planning authority in respect of the project by later than 22 July 2015.

In relation to the planning requirement, the Government notes its policy intention to be that a project which has made a valid planning application on or before 22 July 2015 but is subsequently resubmitted on the advice of the local planning authority rather than going to appeal would meet the planning criterion for the grace period where the final planning permission document that enabled the construction of the station relates to the same station.

Grandfathering

As a further means of limiting the costs of the RO, the Government has also decided to implement its proposal to remove grandfathering for ≤5MW solar PV projects with an accreditation date after 22 July 2015. This change applies only to projects in England & Wales.

Grandfathering has been a key principle of the RO since its inception. It is the principle that a project should retain the same level of support throughout the 20-year support period, based on the level of support applying on the effective date of its accreditation.

However, the removal of grandfathering will not affect those projects that are eligible for the "significant financial commitment" grace period.

There is no special treatment for civic or community projects.

Banding Review

Alongside the Government's decisions on the above matters yesterday, DECC launched a solar PV banding review. Again, this is only for projects in England and Wales.

The banding review is a consultation (not a decision). DECC's proposal is to cut the ROC support rate to 0.8 ROCs/MWh with effect from 1 June 2016. This would apply to both building mounted and ground mounted solar PV.

However, in an unexpected concession, this banding review would not affect projects that are eligible for the "significant financial commitment" grace period. These projects would, if commissioned after 31 March 2016, qualify for support at 1.2 ROCs/MWh (as per the current legislation).

Responses on the banding review are invited by 27 January 2016.


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