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Citiworks doubts could be solved by Feed-in Tariffs

Feed-in Tariffs (FITs) could help combat investment uncertainty caused by the Citiworks case earlier this year – according to a legal adviser to leading property developers.

Earlier this year the European Court of Justice ruling on the Citiworks case raised concerns over the future of renewable and Combined Heat and Power (CHP) schemes as many developers were worried proposed decentralised energy systems would not be legal.

Chris Baker, partner at law firm Davies Arnold Cooper LLP, believes FITs and the proposed Renewable Heat Incentive will help combat the problems caused by these doubts.

He said: “The uncertainty created by the case does make it difficult for developers to secure contributions towards the capital costs involved in installing renewable energy infrastructure.

“While we have to wait for the details of the Government proposals, having a feed-in-tariff may overcome some of the problems that would otherwise arise from the Citiworks case.

“It is very important that the government addresses the FITs issue quickly because there are schemes coming through at the moment which require a renewables solution and developers and Energy Service Companies operators need some certainty about what costs and revenues might be.”

The original case followed a challenge by energy company Citiworks to monopoly supply arrangements at Leipzig airport based on a private wire system.

The European Court of Justice ruled against the German law which allowed, in some cases, monopolies for onsite energy providers. It said the prevention of third-party access breached European law.

Since then the UK Government has been reviewing its policy on decentralised energy schemes and is still to release updated guidance.

Mr Baker believes the issue is particularly important as developers are increasingly required to put in place renewable energy and distributed heat infrastructure to meet planning requirements and sustainability standards such as the Code for Sustainable Homes.

In order to recover some of the considerable costs linked to the installation of low carbon or renewable energy plant such as Combined Heat and Power, heat pumps and photovoltaic developers often look to secure a payment from the Energy Service Company (ESCO) set to operate the plant.

But, ESCO operators in turn want to ensure themselves of ongoing income and are inclined towards private wire systems which give them monopoly control over energy supply and a guaranteed income.

Mr Baker said: “The key thing now is for the Government to consult promptly on the specific details of the tariff so that investors and developers can have some certainty of the level of financial support to enable them to make investment decisions'

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