Gravis Solar 1 Ltd v The Gas and Electricity Markets Authority
| Jurisdiction | England & Wales |
| Judge | Sir Duncan Ouseley |
| Judgment Date | 05 March 2021 |
| Neutral Citation | [2021] EWHC 490 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/2898/2020 |
| Date | 05 March 2021 |
[2021] EWHC 490 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Royal Courts of Justice
Strand, London, WC2A 2LL
Sir Duncan Ouseley
Sitting as a High Court Judge
Case No: CO/2898/2020
The Queen on the application of
Duncan Sinclair and Victoria Hutton (instructed by CMS Cameron McKenna Nabarro Olswang LLP) for the Claimants
SAM Grodzinski QC and Emily Neill (instructed by The Office of the General Counsel to the Gas and Electricity Markets Authority) for the Defendant
Hearing dates: 26 and 27 January 2021
Approved Judgment
This case concerns the lawfulness of the withdrawal on 2 June 2020 of the accreditation of a small solar photovoltaic, or PV, electricity generating station, Kelly Green, by Ofgem. AMP GM011 Ltd, AMP, the second Claimant, owns and operates Kelly Green. Gravis Solar 1 Ltd, GS1, the first Claimant owns AMP. Ofgem carries out accreditation functions on behalf of the Gas and Electricity Markets Authority.
The primary basis upon which the withdrawal of accreditation is said to have been unlawful is that it breached the rights of the Claimants under Article 1 of Protocol 1 to the ECHR; they were each victims, unlawfully, notably disproportionately, deprived of the “possession” of accreditation of Kelly Green, and its consequent rights and expectations. The principal issues raised were whether GS1 was a victim within s7(1) Human Rights Act 1998, and whether the decision struck a disproportionate balance between its impact on private rights and the protection of the public interest. At its heart, is the way in which Ofgem acted upon its conclusion that accreditation had been obtained through the presentation to it, by or on behalf of AMP, of information known to AMP to be inaccurate, its acceptance that GS1, which did not own AMP until January 2018, was innocent of deception, and that AMP's former owners were not part of the new corporate ownership structure or now involved at all with Kelly Green.
Ofgem accepted that AMP was a victim for the purposes of s7 HRA; it also accepted, at least for the purposes of this case, that accreditation, and what went along with it, amounted to “possessions” within A1P1 but were only possessions of AMP, and not of GS1. Ofgem did not seek to controvert the submission of Mr Sinclair for the Claimants that its action amounted to a deprivation of possessions rather than being an instance of control.
A statutory scheme known as the Renewables Obligation Scheme, ROS, has been created for subsidising, and so encouraging, the generation of electricity from renewable energy sources. The main legislation for this Scheme is the Renewables Obligation Order SI No. 2015/1947, ROO. The significance of accreditation in the ROS is that it enables Ofgem to issue Renewables Obligation Certificates, ROCs, to renewable generators, for every megawatt hour of electricity they generate from the renewable source. A renewable generating station cannot be accredited until it has been commissioned. These ROCs are valuable because electricity suppliers are obliged to source a proportion of the electricity they supply from renewable sources. Without those ROCs, the generators of electricity might not be able to sell it to the suppliers of electricity at a price which provided a return on the generation investment adequate to justify it. These ROCs can also be sold to intermediaries, but their ultimate value lies in the use which suppliers are required to make of them to prove compliance with their renewable supply obligation. The withdrawal of the accreditation of Kelly Green meant that no further ROCs could be issued, and the owners would be left to what the supplier market would pay, without the incentive of the ROC.
Ofgem withdrew the accreditation because it concluded that it had been misled about the date when Kelly Green was commissioned. By the Renewables Obligation Closure etc (Amendment) Order, ROCA, SI No 2016/457, dated 25 March 2016, amending the Renewables Obligation Closure Order I No 2014/2388, the ROS was closed to the accreditation of small solar PV generating stations, i.e. those with a capacity below 5 megawatts, MW, commissioned after 31 March 2016. Kelly Green's capacity was 4.9MW. If Kelly Green were commissioned after 31 March 2016, it would have been too late to benefit from the ROC purchase mechanism in the ROS. Thereafter, however, there was a grace period of 1 year, to 31 March 2017. This enabled small PV generating stations, in respect of which, so far as material and putting it broadly, substantial expenditure on construction had already taken place by 31 March 2016, to receive accreditation. This yielded lower rates for the electricity generated.
Accreditation was granted in respect of Kelly Green on 13 January 2017, on the basis that Kelly Green had been commissioned on 15 March 2016. Accreditation, absent various specific statutory reasons, would yield ROCs for 20 years from accreditation, here until 2036. It was granted to AMP GM011 Ltd, the second Claimant, a company set up as a special purpose vehicle for the purpose of owning Kelly Green and operating it. Before GS1's acquisition of AMP, AMP was a wholly owned subsidiary of Solarplicity Debt Funding Ltd, in turn a wholly owned subsidiary of Solarplicity AS Holdings Ltd. Solarplicity Asset Ltd owned the latter. These also owned other special purpose vehicle companies for owning and operating other solar PV generating stations.
In January 2018, through a share purchase agreement, GS1, set up for the purpose by its fund management owner, Gravis Capital Management Ltd, purchased all the shares in Solarplicity AS Holdings Ltd, becoming the owner, at one remove, of all the shares in AMP. AMP has at all times owned and operated Kelly Green, and was and would be entitled to the ROCs issued in respect of it.
I shall have to go through the way in which Ofgem approached accreditation and later concluded that there had been fraud in the information supplied in respect of commissioning in some detail. But the statutory provisions need to be set out before the Decision Letter.
The Renewable Obligations Scheme and withdrawal of accreditation
The Electricity Act 1989, s3A, set the principal objectives for the Gas and Electricity Markets Authority, GEMA as being to “protect the interests of existing and future consumers in relation to electricity….”, which included their interests in the reduction of electricity-supply emissions of greenhouse gases, and in the security of the supply of electricity to them. Mr Sinclair emphasised s3A(5A) which required GEMA to have regard to principles which were “transparent, accountable, proportionate, consistent and targeted only at cases in which action is needed” and any other principles which it thought represented best regulatory practice.
The Electricity Act 1989 is one of the empowering provisions for the Renewables Obligation Order 2015. I do not need to set out the provisions which provide for the mechanisms behind the ROS; I focus on those which deal with accreditation and withdrawal. I do not need separately to deal with ROCs. Article 43 precludes the issue of ROCs in respect of electricity generated by a station which is not accredited. Although at one time, Mr Sinclair raised an issue about the suspension of ROCs, he accepted that there had been no properly formulated challenge to the actions of Ofgem in suspending their issue. There may be such a challenge in other proceedings. The decision on the lawfulness of the withdrawal of accreditation will determine what should happen here in respect of ROCs suspended, revoked or not issued.
Article 89 deals with accreditation: “(2) Where a generating station has been commissioned, the Authority may, upon the application of its operator,…grant the station accreditation.” Article 2 defines “commissioned” as meaning “…the completion of such procedures and tests in relation to that station as constitute, at the time they are undertaken, the usual industry standards and practices for commissioning that type of generating station in order to demonstrate that that generating station is capable of commercial operation.” There is no issue about the meaning or application of that term in these proceedings, though there may be in others. Mr Grodzinski QC for Ofgem pointed out that the definition relates to the completion of tests, and tests which have to demonstrate commercial operability. Ofgem's non-statutory guidance states that accreditation will be effective from the later of the date of the application for accreditation and the date of commissioning. Article 2E of ROCA provides for accreditation during the grace period.
This guidance sets out the steps to be undertaken to obtain accreditation and receive ROCs; it repeats what the ROO requires for tests. The conditions of accreditation include a requirement to accept random checks, for example, on the accuracy of information provided at the time of accreditation.
Article 90 covers the withdrawal of accreditation. I note Article 90(2) which permits GEMA to attach to the accreditation “such conditions as appear to it to be appropriate.” Article 90 (3)-(4) provides:
“(3) Where any of the circumstances mentioned in paragraph (4) apply in relation to…an accreditation which the Authority has granted (whether or not under this Order) and having regard to those circumstances the Authority considers it appropriate do so, the Authority may –
(a)...
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