As has been rumoured in the trade press, we understand that The Department of Energy & Climate Change (DECC) will be consulting on:
- a review of Renewables Obligation (RO) bands for solar PV which will take effect from the 2015/16 financial year; and
- grace period arrangements to protect developers who have already made significant financial commitments.
Details of the consultations are due to be published shortly.
This is obviously leaving developers in a very uncertain position and having short notice of such changes is not good news for investor confidence.
It may well divert developers to Contracts for Difference (CfD) with the first allocation round in October of this year.
A critical question will be what is meant by ‘significant financial commitments’. If we look at CfD, significant financial commitment was defined by way of 10% of project spend. However, if we look at the RO grace periods, eligibility for the offshore wind and ACT grace period is defined by way of the following:
- a grid connection offer in place;
- relevant planning consents;
- land ownership or option in place; and
- a director’s certificate confirming that they have sufficient resources and that the project is expected to commission on or before 31 March 2017.
Accordingly, DECC will no doubt consider these definitions when proposing its definition of significant financial commitment for the purposes of the solar grace period. From past experience, significant financial commitment may well be determined from the date of the consultation itself.