Many local authorities had to shelve their plans to install Solar Photovoltaic (Solar PV) equipment on their dwellings and other properties when the Government cut the Feed In Tariff levels for smaller Solar PV schemes by almost 50% in March 2012.
Since then, the Government has introduced a new "degression" mechanism for future tariff setting which sets in stone when tariff reductions will take place and the variables that will determine the extent of the "cut". Allied to this development has been a continuing fall in the price of Solar PV equipment.
Together these two changes have started to make Solar PV schemes attractive again, especially given that they provide a low risk, RPI-indexed investment which can exceed ordinary commercial investments as well as delivering obvious environmental benefits and providing tenants with a direct financial benefit. In addition, it is possible to structure a Solar PV scheme so that any profits raised accrue to the general fund rather than the HRA which may prove very appealing to local authorities that are under pressure to balance the books.
So if you are thinking of resurrecting plans to install Solar PV, we have put together a list of 10 key legal and commercial considerations:
Ten key considerations before you set up a PV scheme:
- If you want to be able to apply the profits to non-housing purposes, you will need to consider how roof spaces are accounted for – should this be in the HRA or the General Rate Fund?
- Due consideration should be given to whether prudential borrowing can be made on the General Rate Fund so as to avoid the cap on HRA borrowing.
- An agreement should be documented setting out the right to install, maintain and operate the solar panels on roofs and a clear, written guide to each party’s rights and obligations in respect of the solar panels and equipment, and of the electricity produced. This will avoid any future uncertainty with tenants.
- Even if you do not need your tenants’ agreement to install the PV equipment, you will want their co-operation both to safeguard the panels, cables and equipment and to ensure ready access when it is required. There are different approaches to securing such co-operation which should be explored.
- Not all roofs face south. So some roofs may not justify having solar panels installed. Those tenants who do not get panels on their roofs may be aggrieved, so taking steps to prevent disquiet through measures that benefit the whole estate will be worthwhile.
- Because local authorities have a specific power to generate and sell electricity, a “trading company” is not appropriate. But if you wish to consider selling on the panels and the benefit of the FIT tariffs at a future date, you may wish to explore if a company is a convenient vehicle for installing and owning the solar panels and supporting equipment.
- You will need to consider what happens to the Solar PV equipment when a tenant exercises the Right to Buy and take steps to deal with such circumstances in any agreement with your tenants.
- Make sure that you have a specific right of access to install, operate and maintain your PV panels as this will not normally be covered by the access provisions contained in your standard tenancy agreement.
- Put in place a clear policy, covering the different categories of tenants and other occupiers who may wish to be included in your PV scheme, to help you to reduce potential complaints and legal challenges from any occupiers outside the scheme.
- Draft your agreement as a variation of your tenancy agreement to ensure that the agreement with your tenant will stay in place in the event of an exchange or succession.
Bevan Brittan is one of the country's leading advisers to local authorities with specialist housing, energy and property teams. We have advised a number of local authorities and registered providers on the supply and installation of Solar PV on public sector assets including most recently two local authorities on an innovative joint procurement of Solar PV equipment as well as Alliance Homes on one of the largest Solar PV installations in the country for a registered provider to date. This means our lawyers can provide insightful experience advising on the practical steps involved in setting up Solar PV and other renewable energy schemes.
If you are planning a Solar PV scheme we would be delighted to meet up with you at no obligation to share our experience with you. To set up a meeting to discuss in more detail, please make contact below.