R Daniel Justin Farmiloe v Secretary of State for Business Energy and Industrial Strategy
| Jurisdiction | England & Wales |
| Judge | Mrs Justice Lang |
| Judgment Date | 07 November 2019 |
| Neutral Citation | [2019] EWHC 2981 (Admin) |
| Court | Queen's Bench Division (Administrative Court) |
| Docket Number | Case No: CO/4651/2018 |
| Date | 07 November 2019 |
[2019] EWHC 2981 (Admin)
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
ADMINISTRATIVE COURT
Birmingham Civil Justice Centre
33 Bull St, Birmingham, B4 6DS
Mrs Justice Lang DBE
Case No: CO/4651/2018
Sarah Clover (instructed by Shakespeare Martineau LLP) for the Claimant
Jason Coppel QC and Stephen Kosmin (instructed by the Government Legal Department) for the First Defendant and (instructed by Ofgem Office of the General Counsel) for the Second Defendant
Hearing dates: 29 & 30 July 2019, 3 October 2019
Approved Judgment
On 14 September 2017 the Claimant made an application to the Office of Gas and Electricity Markets (“Ofgem”) for accreditation under the Domestic Renewable Heat Incentive Scheme (“the DRHI Scheme”) in order to obtain a subsidy, pursuant to the Domestic Renewable Heat Incentive Scheme Regulations 2014, as amended, (“the 2014 Regulations”), in respect of the newly installed renewable heating system at his home.
In this claim, the Claimant challenged Ofgem's decision, dated 21 August 2018, and confirmed after a review on 27 September 2018, whereby he was requested to provide a new Energy Performance Certificate (“EPC”) in support of his application, on the ground that the heat demand specified in the EPC which he had submitted was overestimated.
Ofgem operates as the executive arm of the Second Defendant and has no independent legal personality. The Second Defendant (“GEMA”) is a body corporate established under section 1 of the Utilities Act 2000. It is the independent regulator of the gas and electricity markets in Great Britain and in that role it has defined statutory duties and powers. Amongst other matters, it has functions relating to the administration of a number of energy efficient and “green energy” (i.e. non-fossil fuel) schemes, including the DRHI Scheme, which it delivers on behalf of the First Defendant.
The DRHI Scheme was established by the 2014 Regulations, which were made by the First Defendant, pursuant to section 100 of the Energy Act 2008. It allows domestic property owners to apply for subsidy payments if they install an eligible renewable heating system which meets the criteria set out in the 2014 Regulations. The Second Defendant is responsible for the operation and administration of the DRHI Scheme.
The application for permission to apply for judicial review was not opposed by the Defendants. Permission was granted on 14 February 2019 by Andrews J.
History
At all material times, the Claimant resided with his family in a large, traditional stone-built house in Oxfordshire (“the Property”). Prior to September 2017, space heating at the Property was primarily by means of electric storage heaters, with room heaters and log fires as secondary heating. Hot water at the property was heated by electricity.
The Claimant had knowledge of the DRHI Scheme, both through his own research, and in his capacity as a director of a company called Earth Source Energy Limited, which undertook installation of renewable heating systems. Under the 2014 Regulations, eligible plants for renewable heating systems are biomass plants, heat pumps or solar thermal plants. Traditional forms of heating systems, powered by gas, electricity, oil and coal, are not renewable, and so are not eligible for a subsidy.
The Claimant investigated the installation of a new ground source heat pump system in his property, to provide space and water heating. A ground source heat pump is defined in regulation 2 of the 2014 Regulations as a plant which generates heat by absorbing energy stored in the form of heat from the ground. The capital cost of installation was high (in excess of £240,000) which the Claimant had to finance with a substantial loan. Therefore, in order to decide whether the installation was financially viable for him, the Claimant sought to calculate in advance how much subsidy he would receive under the DRHI scheme. In doing so, he was able to draw on his experience of similar installations on behalf of clients of Earth Source Energy Limited.
The DRHI Scheme estimates the energy required to heat a property, either by metering or by “deeming” i.e. estimating. The Claimant correctly concluded that his proposed system would not be metered by Ofgem under the DRHI Scheme, and so his application would be considering under the “deeming” provisions in the 2014 Regulations.
Under regulation 29 of the 2014 Regulations, a plant's deemed annual heat generation is calculated by a formula which utilises the heat demand specified in an EPC and the seasonal performance factor (“SPF”), as defined in regulation 2, for the heat pump.
In light of this, the Claimant commissioned an EPC in order to calculate his potential subsidy entitlement. The EPC assessment scheme was developed for domestic property sales and it is governed by the Energy Performance of Buildings (England and Wales) Regulations 2012. EPC assessors are independent professionals who are trained to apply the prescribed methodology. The methodology is as approved by the Secretary of State under regulation 24 of the Building Regulations 2010. In this case, the EPC assessor was required to apply a methodology called the 'Reduced data Standard Assessment Procedure (“RdSAP”) which makes assumptions about the performance of buildings, and the heating requirements of occupants, to estimate heat demand. The RdSAP methodology is revised from time to time.
The EPC assessment of the Property was carried out on 24 February 2017, when the Property was still primarily heated by electric storage heaters. The EPC was issued on 3 March 2017, applying RdSAP v.9.92, which was in force at that date. The deemed annual space heat demand for the Property under v.9.92 was assessed at 226,783 kWh (kilowatt hours).
As the Claimant explained in paragraphs 4 to 37 of his third witness statement, a building of a specific size and construction requires a certain amount of heat energy (measured in kilowatt hours) to reach, and remain at, a particular temperature, regardless of the type of heating system used. However, different heating systems may require more or less fuel to generate the same amount of heat energy, which will affect running costs. Different heating systems may be efficient or inefficient in maintaining a particular temperature, depending on the effectiveness of thermostats and other controls, and whether they are slow to warm and cool down.
Prior to installation, the Claimant was provided with the MCS Performance Estimate which installers are required to provide to customers prior to entering into a contract. The MCS Performance Estimate provided him with the SPF information which enabled him to calculate his subsidy entitlement.
The Claimant was not able to calculate his subsidy using the First Defendant's online calculator, as the heat demand figures in his EPC exceeded the caps inserted into the online software. However, he was able to calculate it following a worked example provided by Ofgem in its guidance (‘Essential Guide for Applicants’, v.3.0 March 2016, p.29). The Claimant's worked calculation to ascertain his subsidy entitlement was set out in his fourth witness statement, at paragraph 88:
| Estimated annual heat load (from the EPC) | 229,413 kWh |
| SPF | 4.79 |
| Current heat pump tariff rate (September 2017) | 19.64 p/kWh |
| Estimated annual heat load (total heat demand x (1 – 1/SPF): | 229,413 kWh x (1–1/4.79) = 181,519 kWh |
| Total annual Domestic RHI payment (tariff x estimated annual heat load): | 181,519 kWh x 20.89 p/kWh = £35,650.30 |
| Quarterly Domestic RHI payment | £35,650.30 ÷ 4 = £8,9125.58 |
In reliance upon his calculation that he would be entitled to a subsidy of about £35,650.30 per annum, the Claimant applied for a loan. On or about 4 September 2017, Earth Source Energy Limited installed and commissioned a ground source heat pump system at the Property, comprising three pumps. It supplied space and water heating.
On 14 September 2017, the Claimant completed and submitted an online application for accreditation to the DRHI Scheme, based upon his installation of a ground source heat pump system, used both for space and water heating at the Property.
The Claimant was required to submit any application for accreditation within 12 months of the date on which the new system was commissioned (regulation 17(4) of the 2014 Regulations).
The Claimant was required to support his application with the most recent EPC for his Property (regulation 17(2)(a) and paragraph 1(i) of Part 1 of Schedule 4, 2014 Regulations). By paragraph 1(2)(b) of Schedule 3 to the 2014 Regulations, the EPC had to have been issued less than 24 months before the date on which the application is made.
The Claimant's EPC issued on 3 March 2017 fulfilled both these requirements and accordingly he submitted it with his application. Neither the 2014 Regulations nor Ofgem's guidance required him to produce an EPC in respect of his new ground source heat pump heating system.
The Claimant's online application was diverted out of the automatic accreditation system for a manual review by a member of staff, because it was identified as a potential high value subsidy payment. In an email dated 19 September 2017, Mr Chau, a Domestic RHI Officer at Ofgem, wrote to the Claimant informing him that his Application was under review and further information was required in order to process the claim. He noted that: “[l]ooking upon the current Energy Performance Certificate (EPC) it seems that the heat requirement of your property is considerably higher than the average property”. He asked for site...
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