The cuts to solar power subsidies, announced in October 2011, were announced with only a few weeks’ notice and meant that homeowners, community groups and businesses who installed solar panels under the FIT scheme, saw their rate reduced from the promised 43.3p per kWh of solar electricity generated to just 21p, cutting their returns from around 7% to 4%.
The government had argued that the cuts were needed as the cost of solar power had plummeted and that the subsidy scheme, inherited from the Labour government, was becoming too expensive for consumers – who would ultimately foot the bill. However the cuts were ruled to be unlawful by the high court in December 2011, a ruling that was upheld despite subsequent UK government appeals to the Supreme Court.
‘Letter before claim’
The companies demanding compensation have written a ‘letter before claim’ to the Department of Energy and Climate Change, saying the government’s action "caused major financial losses and materially harmed the confidence of both consumers and the industry". The letter does not mark a formal legal move, and Prospect Law, the firm representing the companies, has said that it hopes the government will settle out of court; however it is expected that the government will resist the claims and therefore face more legal action. The claimants have asked that the government respond within two weeks.
"Unfortunately the losses incurred as a result of the feed-in tariff cuts are very real," said Nick Keighley, founding director of Solarlec, one of the companies named in the letter. "Today we're respectfully asking that the department acknowledges its unlawful behaviour and rectifies the damage caused to the industry.”
The results of the action will be watched closely by the solar industry; any victory for the firms that results in damages being paid could set a precedent that would allow other companies to also seek compensation, particularly given the large numbers of firms reporting falling sales and lost contracts. However, there are also divisions within the solar industry itself, between those companies that are keen to move on from the events of last year and those who feel the government has not done enough to compensate the firms affected.