Exploring the grace period within URD 14D/114. Deadline set for formal responses.
Confirmation of the last date for formal response to the British Government change to solar financial regime for 5+MW plants under Consultation.
“I’m developing a 5+MW plant but did not pre-accredit the related asset-SPV’s prospective facility for ROCs before 13.5.14 (the publication date of URD 14D/114) – how does the Grace Period (in URD 14D/114) operate in relation to my PV asset?”
General disclaimer: the following constitutes the written view of the author and in no way constitutes actual legal advice or a legal opinion and so no reliance may be placed upon the content hereinafter contained by any reader of this document in any way whatsoever. In the event that legal advice or opinion is sought, please contact the author of this opinion at the contact details below. The view below is expressly confined to matters as they stand at 22 May 2014, under the laws of England and Wales and in accordance with current publications from Her Majesty’s Department for the Energy and Climate Change as published at https://www.gov.uk on 13 May, 2014.
LAST DATE FOR RESPONSES TO URD 14D/114
The last date for responses to the Consultation can be by 7 July 2014. Any assistance upon construction of a response may be requested using the contact information below. See FN1 below. GRACE PERIOD FOR 5+MW GROUND-MOUNTED PV INSTALLATIONS
Evidence to allow the grace period to install a >5MW plant by April 2016 will not be invoked unless: (a) preliminary ROCs accreditation for each development asset was obtained
on or before 13.5.14, or,
(b) evidence at paragraph 32 in URD 14D/114 can be provided, namely,
(a) an accepted DNO connection offer; and,
(b) planning consent (conditional/unconditional) or confirmation that there is no planning consent; and,
(c) a Director’s Certificate that the developer or the SPV-yieldco that will be the tenant-co during the O&M phase under a lease has an agreement to lease with the Landowner, or, has bought the freehold title before 13.5.14; and,
(d) evidence in the form of receipted invoices that £100,000 per expected installed megawatt of expected consented capacity has been expended on/before 13.5.14, or material equipment contracts (for the photovoltaic panels, inverters, switch gear and mounting structures) have been entered into on or before 13.5.14 (probably with evidence of the board meetings/written resolution passed by the board to approve entry into such contracts to prove evidence of capacity).
London, 22 May 2014. To find out more on how My Business Counsel can assist you, please contact our Solar Team today on email@example.com or by calling +44 (0) 203 507 0152.
FN1 – Responses
Issue date of URD 14D/114: 13 May 2014
Responses to URD 14D/114 by: 7 July 2014
– See at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/310524/Consultation_on_changes_to_financial_support_for_solar_PV_.pdf (p.2/24)
FN2 – Grace period
21. The Government therefore considers it necessary to take action to control the costs of large-scale solar PV to ensure it is affordable in the context of the RO and EMR. We propose to achieve this by closing the RO across Great Britain to new solar PV generating stations, both ground- and building-mounted, above 5MW from 1 April 2015. The closure would also apply to any additional capacity added to an accredited solar PV station from 1 April 2015 where the station is, or would become, above 5MW. This would mean, for example, that a station which is already above 5MW in size could not add additional capacity under the RO after 31 March 2015 unless it qualified for a grace period in respect of the additional capacity. Similarly, a station currently of 3MW, for example, could add up to an additional 2MW of capacity after 31 March 2015 without requiring a grace period. However, such a station could not add an amount of capacity after 31 March 2015 that would take the total installed capacity above 5MW unless the additional capacity that took it above the 5MW threshold qualified for a grace period. The 5MW limit would be based on the total installed capacity of a station.
22. Regardless of the changes proposed in this consultation document, solar PV installations above 5MW in size will be eligible to apply for support under the new CfD auctions. The first allocation round is expected to open in October 2014. In addition, projects of 5MW and below would continue to be eligible for the RO (see below), and support for small-scale solar PV projects will continue to be available from the FIT scheme.
23. In order to seek to protect developers that have already made a significant financial commitment to projects, we propose the following grace period arrangements. New solar PV stations above 5MW would continue to be eligible to enter the RO after 31 March 2015 if one of the following conditions is met:
a) preliminary accreditation under the RO has been obtained for the station on or before 13 May 2014 (i.e. the date of publication of this consultation); or
b) evidence as described in paragraphs 32-33 is provided to Ofgem demonstrating that significant commitments have been made on or before 13 May 2014 in respect of the project. The evidence must be provided to Ofgem by 31 March 2015.
24. We propose that the above grace period would also be available for additional capacity added to stations accredited on or before 13 May 2014.
25. In addition, in order to benefit from the grace period, the station must be commissioned and accredited by 31 March 2016 and all of the other usual RO eligibility requirements must be met. In the case of additional capacity, it must be added to the station by 31 March 2016. The grace period lasts for 1 year following closure of the RO to larger solar PV projects because the relatively fast deployment times for solar PV leads us to expect that those projects which have already incurred significant financial commitments should be able to commission and accredit by 31 March 2016.
26. Projects benefiting from a grace period would receive the ROC level in force on the date of accreditation, i.e. the grace period would not protect the project from the scheduled reductions in the level of ROC support.
27. Before the 1 April 2015 closure date, new solar PV stations above 5MW can continue to be accredited under the RO if they have commissioned and submitted an accreditation application before 1 April 2015 and meet all the other usual RO eligibility requirements. This also applies to additional capacity added to existing accredited stations before 1 April 2015. Solar PV projects above 5MW in scale which for any reason are not eligible for the grace period and do not accredit by 31 March 2015, will not be eligible to enter the RO after that date. They will, however, be eligible to apply for support under the CfD once that process opens for applications, subject to the rules of that scheme.
28. As from 1 April 2015, solar PV installations supported under the FIT will no longer be allowed to enter the RO when they exceed the maximum 5MW threshold under the FIT.
29. The RO is already closed to solar PV micro-generators. The RO would remain open to new solar PV stations up to 5MW (other than micro-generators) until 31 March 2017. The grid connection delay grace period set out in the Government Response to the consultations on Renewable Obligation Transition and on Grace Periods13 would remain available to solar PV stations up to 5MW. The 1 April 2017 closure date and grid delay grace period would continue to apply to additional capacity added to RO accredited solar PV stations, as long as the entire station remains at 5MW or less total installed capacity.
Evidence requirements for the grace period
32. Due to the speed at which solar PV projects can deploy and the need for cost control, the evidence requirements need to be rigorous to ensure that only those projects that have already made significant financial commitments are able to qualify for the grace period. In drawing up the evidence requirements, we wish to ensure that they enable Ofgem to
assess the evidence quickly and objectively, and with confidence that their decisions are unlikely to be subject to subsequent legal challenge; and that they minimise the risk of gaming. This implies that the evidence needs to be defined in detail and involve minimal subjective judgement or evaluation.
33. We propose that four categories of evidence will be required, and that developers will need to present all four types of evidence in combination to Ofgem in order to demonstrate eligibility to enter the RO after 31 March 2015. The categories below draw on our experience of, and responses from, the consultations on RO grace periods associated with closure of the RO in April 201714 and DECC engagement with stakeholders on the evidence to demonstrate progress against delivery milestones set out in contracts for difference. The proposed forms of evidence are:
a) A grid connection offer and acceptance of that offer, both dated no later than 13 May 2014, and a letter from the network operator estimating or setting a date for the grid connection which is on or before 31 March 2016; or confirmation that no grid connection is required;
b) Relevant planning consents dated no later than 13 May 2014, evidenced by either planning permission under the Town and Country Planning Act 1990 or the Town and Country Planning (Scotland) Act 1997, consent under section 36 of the Electricity Act, or development consent under the Planning Act 2008; or confirmation that planning approval is not required. We consider it unlikely that operators will necessarily be able to comply with all outstanding conditions precedent in advance of construction. We
therefore propose not to require that conditions precedent set upon the planning consent are fulfilled in advance of construction;
c) A Director’s Certificate confirming that as at 13 May 2014 the developer or proposed operator of the station owns the land on which the station is to be situated or has an agreement to lease the land. We do not consider that an option to purchase or lease land is a sufficient indication that a project has made a significant financial decision and is as committed to proceeding as a project which has actually purchased or leased the land;
d) Evidence in the form of invoices and payment receipts from the developer or proposed operator of the station that demonstrate that a minimum of £100,000 per MW of expected consented capacity in project pre-commissioning costs (PPC) has been incurred on the project by 13 May 2014, OR proof that all material equipment contracts have been entered into for the project by 13 May 2014. For the purposes of this consultation, PPC refers to the costs of the initial development of a plant including planning, pre-development costs, and equipment and construction costs. With regard to solar PV developments >5MW, £100,000 per MW of capacity represents 10% of the total project pre-commissioning costs quoted in the CfD agreement15. For example, a 6MW project would have to provide invoices and payment receipts for expenditure of at least £600,000
incurred by 13 May 2014. For solar PV developments >5MW, we propose that ‘material equipment contracts’ means contracts for the key electricity generation plant and apparatus used at a solar PV station, and includes photovoltaic panels, inverters, switch gear and mounting structures.
Deadline and grace periods within URD 14D/114