UK: Community Renewable Schemes: A Grant Or FITs - But Not Both?

The European Commission issued its decision on the State Aid compliance of the Feed-in Tariffs scheme (FITs) in April 2010. The good news is that FITs were cleared as compliant with State Aid rules. However, the Commission's decision appears to have created some difficulty for the Department for Energy and Climate Change (DECC) in terms of the State Aid compliance of FITs when coupled with other investment aid, potentially including a wide array of renewables grants, such as the grants which a large number of community bodies have applied for or are currently reliant upon to facilitate development of community renewables projects. The issue has also created uncertainty for, and is hugely important to, a large number of community groups.

In short, the Commission's decision broadly sets out that eligible generators of electricity who have received "investment aid" will: "not be allowed to receive FITs for the same plant [and that a] person applying for FITs will be required to declare whether they have received any aid for their generation plant, and a grant will disqualify the recipient from also receiving a feed-in tariff."

Two exceptions are then set out. Payments may be allowed on an individual basis where the costs for a particular installation eligible to receive FITs are significantly greater than standardised costs on which FITs are calculated, and "households" may be allowed to receive investment aid combined with FITs payments provided the totality of aid is within permitted de minimis levels and comply with state aid rules.

Currently DECC is preparing guidance on the issue.  The guidance will be key to community groups who are both seeking grant funding and who are also factoring into their project costs/financials the benefit of FITs, and is likely to inform decisions including whether or not to pay back grant funding that would disqualify FITs and seek alterative funding, and whether or not to seek potential alternative funding sources.

The outcome of the DECCs deliberations is anxiously awaited, but in the meantime if you have made an application for a grant, or if you are considering applying for one, until guidance is issued it is difficult to be certain that your generation project will be eligible for FITs if you are also in receipt or going to be in receipt of grant funding.  The information site for FITs does set out some information on grant schemes deemed to be affected and unaffected, and those in relation to which the position is uncertain.

Where FITs and grant funding together prove to be incompatible, community projects may have to decide between either grant funding or private funding but may not be able to afford to take both. If a scheme is dependent to any extent on FITs income to meet repayments, a project may not be bankable without FITs.

If you have already received grant funding and the future viability of the project is dependent on your being able to receive FITs, be aware that a possible outcome of the DECCs decision could be a need to repay the grant and/or to restructure the project in order to be eligible for FITs.

The Scottish Government is urging DECC to provide clear guidance, and we will issue a further e-update as soon as we know what that guidance says.

MacRoberts is a leading advisor on renewable energy and third sector issues. Our Community Enterprise Unit specialises in advising community groups on a wide range of projects, frequently involving renewable energy.

Disclaimer

The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.

© MacRoberts 2010

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