The Department for Energy and Climate Change v Breyer Group Plc and Others
| Jurisdiction | England & Wales |
| Judge | Lord Justice Richards,Lord Justice Ryder |
| Judgment Date | 28 April 2015 |
| Neutral Citation | [2015] EWCA Civ 408 |
| Docket Number | Case No: A2/2014/2909, 2910, 2911, 2913 |
| Court | Court of Appeal (Civil Division) |
| Date | 28 April 2015 |
[2015] EWCA Civ 408
Lord Dyson, MASTER OF THE ROLLS
Lord Justice Richards
and
Lord Justice Ryder
Case No: A2/2014/2909, 2910, 2911, 2913
IN THE SUPREME COURT OF JUDICATURE
COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
Mr. Justice Coulson
Royal Courts of Justice
Strand, London, WC2A 2LL
Michael Beloff QC and James Cornwell Hanif Mussa (instructed by The Government Legal Department) for the Appellant
Sam Grodzinski QC and Andrew Scott (instructed by Asserson Law Offices) for Breyer Group PLC & others and for Homesun Holdings Limited & another, Patrick Lawrence QC and Can Yeginsu (instructed by Bhailok Fielding Solicitors) for Free Power for Schools LP and Touch Solar Ltd for the Respondents
Hearing dates: 17–19 March 2015
Master of the Rolls:
The claims made in this litigation relate to the Feed-in-Tariffs ("FIT") scheme which was introduced by the Department of Energy and Climate Change ("DECC") on 1 April 2010 pursuant to the Feed-in Tariffs (Specified Maximum Capacity and Functions) Order 2010 and under the Energy Act 2008 ("the 2008 Act"). The FIT scheme encourages low-carbon generation of electricity by specified types of technology, including solar photovoltaic ("solar PV"). The FIT, which is set by DECC, comprises two elements: (i) the "generation tariff" (calculated by reference to the number of kilowatt hours ("kWh") produced by an installation operated by a small-scale producer and which is set at different levels depending on the generation technology used and the size of the installation); and (ii) the "export tariff" (calculated by reference to the number of kWhs provided by a small-scale producer to the electricity supplier and which is set at the same value regardless of the technology and the size of the installation). This case is principally concerned with the generation tariff.
Solar PV traditionally had high installation and equipment costs as compared with other low-carbon generation technologies (although these costs have fallen sharply in recent years). For that reason, the tariff level for solar PV was originally set at a higher level than for other technologies when the FIT scheme was introduced.
A cardinal feature of the scheme as originally enacted was that once a solar PV installation was built and commissioned (typically on the roof of a building), the generation tariff was fixed for the whole of the "eligibility period" of 25 years, subject only to an indexation allowance for inflation.
The generation tariff, which was set out in Schedule A to Condition 33 of the Standard Conditions of Electricity Supply Licences, could only be amended (i) following a process of consultation and then a 40 day period of Parliamentary scrutiny of the proposed licence modification (section 42 of the 2008 Act); and (ii) in relation to new solar PV installations commissioned after the date that Parliament approved the modification.
DECC's originally stated intention was for the FIT rates to remain unchanged for new installations from the inception of the scheme in April 2010 until April 2012, so as to provide further certainty for investors in the initial years of the scheme. DECC said that it might conduct an early review of the scheme prior to April 2012, and reduce rates for new installations if there was an urgent need to do so. But it repeatedly gave assurances that it would not act retrospectively in bringing such changes into effect: see paras 9 to 11 of the judgment of Coulson J which is the subject of this appeal.
The history leading up to the implementation of the FIT scheme is described at paras 8 to 19 of the Agreed Facts which are set out in Appendix 1 of Coulson J's judgment. Prior to the introduction of the scheme, DECC published a Consultation Paper in July 2009. In February 2010, it published its Response. Among the features of DECC's proposals were that: (i) it was important to ensure value for money for the scheme as a whole; (ii) tariffs were to be set through consideration of technology costs and electricity generation expectations at different scales so as to deliver an approximate rate of return of 5–8% for well-sited installations (5% in the case of solar PV); (iii) tariffs that were available for new installations would "degress" each year (i.e. would automatically reduce to reflect predicted technology cost reductions in order to ensure that new installations received the same approximate rates of return as installations already supported through FITs); (iv) once a generation tariff had been allocated to an installation, the tariff was to remain fixed (subject to changes to reflect inflation) for the life of the installation or the life of the tariff, whichever was the shorter. The need for reviews of the scheme had been identified from the outset: see paras 3.96–3.102 of the 2009 Consultation and paras 7 and 161–166 of the Response.
By December 2010, it had become clear that (i) the number of large installations was far greater than had been foreseen; (ii) the greater than expected development of solar PV installations was due, at least in part, to a greater than expected reduction in the costs of installation; (iii) one consequence of this was to increase the rate of return to figures above the 5–8% rate of return (5% for solar PV) on which the scheme was based (double digit returns were regularly reported for solar PV); and (iv) the increased number of solar PV projects raised the prospect that disproportionate amounts of funding would be taken by such schemes, potentially at the expense of other forms of low-carbon micro-generation technology.
On 7 February 2011, DECC announced a comprehensive review of the scheme. On 31 October 2011, it published a consultation document as part of the review. The document set out four proposals. The first was for a reduction in the generation tariff payable to the owners of small-scale solar PV generation installations. The rate was to be reduced from up to 43.3p per kWh to up to 21p per kWh. The second ("the Proposal") was:
"[to] apply new generation tariffs from 1 April 2012 to all new solar PV installations with an eligibility date on or after an earlier 'reference date' which we propose should be 12 December 2011. Installations with an eligibility date before the reference date will not be affected and will continue to be eligible for the current generation tariffs. Installations with an eligibility date between the reference date and 1 April 2012 would be eligible for the current generation tariffs for electricity generated before 1 April 2012, but would move to the new generation tariffs for electricity generated on or after 1 April 2012."
In short, DECC proposed to bring forward from 1 April 2012 to 12 December 2011 the date by which installations had to be commissioned/registered in order to qualify for the original tariff rates for the life of the installation.
The Impact Assessment annexed to the consultation document identified the problems with the "do nothing" option (i.e. with only 9% degression taking effect in April 2012): new investors in solar PV would be able to benefit from rates of return well in excess of the 5% that the tariffs were intended to deliver. The Assessment stated at para 7:
"This overcompensation compromises the value for money of the FITs scheme to the energy consumers who meet its costs through their bills. If uptake continues to increase as it has been doing, the affordability of the whole FIT scheme will quickly come under threat."
The Proposal was made on the basis that DECC expected that, if implemented, it would save approximately £1.6 billion.
The following facts are assumed to be true for the purpose of determining the preliminary issues which were ordered to be tried and with which this appeal is concerned:
"Assumed facts as to the purpose of the FIT Scheme and the later proposed modifications
………….
46. ………..The consultation was open-minded and genuine and the outcome was not predetermined.
Assumed facts as to the Defendant's knowledge and intention concerning the Proposal
50. The Defendant knew that it was very likely that, and intended that, those operating businesses in the area of small-scale Solar PV electricity generation, including businesses such as those operated by the Claimants, would from the time the October 2011 Consultation was published, conduct their businesses on the assumption that the Proposal would come into effect as set out in that Consultation.
51. The Defendant knew that it was very likely that, and intended that, the publication of the Proposal would have an immediate effect on the actions of those involved in Solar PV installations such as the Claimants, in that the proposed tariff would be regarded by the vast majority of such businesses as economically unacceptable, with the consequence that they would be deterred from proceeding with Solar PV installations.
Assumed facts as to the impact of the Proposal
52. The matters referred to above had an immediate and serious adverse impact on the Claimants' businesses, which impact was reasonably foreseeable. It was not economically viable for the Claimants to continue their businesses in relation to the installation of solar PV Systems, unless such Systems could be installed and commissioned by the reference date of 12 December 2011, which was 6 weeks from the publication of the Proposal; and that the majority of installations which had been planned and contracted...
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