Yesterday's debate in the House of Lords on the amendments to close the Renewables Obligation (RO) to onshore wind projects early saw very strong criticism and concluded with a government defeat on their amendments to the Energy Bill.

The Lords voted by 242 for a Labour amendment moved by Baroness Worthington to delete draft clause 66 which sets out the closure of the RO to onshore wind from 31 March 2016, a year earlier than planned.

Early closure of the RO to onshore wind 

The government announced earlier this year that it would close the Renewables Obligation (RO) to onshore wind in 2016, followed by a formal announcement on the 'grace period' on 8 October 2015, to allow a number of projects at an advanced stage a one-year allowance beyond the new closure. Government had stated that to qualify for the grace period projects would need to have planning consent, a grid connection and a land agreement prior to 18 June 2015. Projects meeting all these criteria and able to demonstrate difficulties in securing finance from lenders since 18 June would also be allowed up to nine months of extra time to accredit under the RO.

The government amendments 

Early closure of the RO to onshore wind was tabled as an amendment (draft clause 66) to the Energy Bill currently progressing through Parliament.

Following extensive debate in Committee on 14 October the government was forced to withdraw proposed clarifying amendments to the grace period. It re-tabled clarifying amendments at the House of Lords report stage on 21 October.

But in a move which meant that the government's amendments were not put to a vote, the Lords voted in favour of shadow energy minister Baroness Worthington’s amendment to remove clause 66 altogether from the Energy Bill.

The Debate

The government's proposed RO grace period criteria – 'the approved development condition' - came under very heavy, cross-party criticism from the Lords which ranged from criticism of the decision to close the RO to offshore wind a year early, through to detailed criticism of  practical effect of the current drafting.

The government amendments would have allowed projects that successfully appealed against refusal or non-determination by a planning committee to be eligible for the RO grace period as long as the appeal was filed by 18 June. However, the Government's amendments did not address a number of perceived anomalies including that projects consented by local authorities by 18 June but subject to a Section 106 agreement (or Section 75 decision notice in Scotland) would not qualify for the grace period.

What happens next?

A number of non-government amendments had been tabled to address a number of issues with the operation of the grace period. However, given the vote in favour of removing clause 66 altogether, the non-government amendments (78RA, 78RB, 78RC, 78RF and 78RG) were not moved.

Conservative peers alleged that the vote in favour of the opposition amendment was contrary to the Salisbury Convention whereby members of the House of Lords do not oppose legislation set out in the elected government's manifesto. Labour peers countered that the Conservatives' election manifesto pledge to end "new" public subsidy for onshore wind did not apply to the RO.

Luke Gabb, partner in the Energy and Natural Resource Sector at Bond Dickinson commented:

"Far from providing greater certainty for investors this turn of events creates further uncertainty for developers, and in the eyes of investors when they see reports of the vote referred to as a 'constitutional crisis'. The government’s plan to end onshore wind subsidies next year must now be in doubt. It is unclear what will happen next, though it must be likely that government will again table amendments to reinsert the subsidy cut at third reading, a date for which is still to be set. The final legislation and outcome could be delayed."