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Author Topic: FITs and grants  (Read 7849 times)
Ted
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« on: June 24, 2010, 06:17:43 PM »

The EU have just published a finding on their examination of GB FITs which clarifies some of the issues regarding the combination of state aid via capital grants and FITs payments themselves.

http://ec.europa.eu/community_law/state_aids/comp-2010/n094-10.pdf

The relevant part (p12) which clarifies the "case by case" statement in the DECC consultation response document states:

Quote
2.10.2. Cumulation with other schemes

59. The UK authorities provided that they will ensure that generators which have
received investment aid will not be allowed to receive FITs for the same plant. 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. However, there are two exceptions to this rule.

60. First, in certain specific situations, combination of investment aid and FIT
payments will be allowed on an individual basis. This will be the case where the
costs for a particular installation eligible to FITs are significantly greater than the
standardised costs on which the FITs are calculated. The UK authorities indicated
that such additional costs may, for instance, relate to measures to reduce the
environmental impact of installations (e.g. measures to protect fish and other
wildlife in small hydro schemes).

61. In any such situation, Ofgem, acting as administrator of the scheme, will ensure
that the applicant demonstrates that the difference between the two following terms
is positive or equal to zero:
- the first term is the production cost of the electricity generated by the plant,
from which the investment aid granted to the plant in question is deducted;
- the second term is the amount of FIT payment to be received by the
generating plant.

62. Second, the UK authorities indicated that households may be allowed to receive
investment aid combined with FIT payments provided the totality of aid is within
the limit of de minimis aid and that the granting of such cumulated aid complies
with the rules laid down in Commission Regulation No 1998/2006 of 15 December
2006 on the application of Articles 107 and 108 of the Treaty to de minimis aid.

The EU have concluded that the FITs scheme does not break EU rules provided that these conditions are imposed.

Any changes to the notified FITs scheme would require a new determination from the EU.
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Iain
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« Reply #1 on: June 25, 2010, 02:20:54 PM »

Hi Ted
Perhaps it is just me but I don't really understand what it is saying in section 62. My system was commissioned Oct 2009 and I received the grant.I was registered for ROC's. Does this affect me?
Just for info, I phoned Scottish and Southern about sending in Generation/export readings. Apparently if you have registered for FIT's directly the readings will be requested this month  and payment will follow. If you have registered for ROC's and are being transferred to FIT's there will be a delay. They are still waiting for OFGEM to complete transfers. This might happen next month, S&S are expecting all the transfers to arrive in one block.
Iain
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Ted
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« Reply #2 on: June 25, 2010, 03:48:04 PM »

Section 62 covers the situation where a householder received a LCBP Phase I (or other centrally funded) grant and also gets the full FITs tariff. This is confirmed as OK as far as the EU are concerned, subject to those conditions.
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Ted
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« Reply #3 on: June 26, 2010, 02:45:52 PM »

There's more clarification from the LCBP Phase II website - copied here just in case it disappears.  Why, on the basis of what this says, village halls have been asked to repay their LCBP Phase II grants in order to get FITs seems difficult to decipher.

State Aid

Overview

The European Commission has considerable powers to monitor, control and restrict the forms and levels of aid given by all Member States to undertakings. The objective of State Aid control is to ensure that government interventions do not distort competition and intra-community trade. In this respect, State Aid is defined as an advantage in any form whatsoever conferred on a selective basis to undertakings by national public authorities.

The State Aid rules apply to aid granted by the State or through State resources, and include any private body established or appointed by the State to administer aid (e.g. BRE administering the Low Carbon Buildings Programme on behalf of DECC).

Details

Grant awards under the Low Carbon Buildings Programme cannot be made to any organisation or public body which falls within the concept of an ‘undertaking', defined by Article 87(1) EC Treaty as any entity engaged in an economic activity, regardless of the legal status of the entity or the way it is funded. An activity can be regarded as ‘economic' even if it is not profitable, or if it lacks an economic purpose provided that it is carrying on some commercial activity.

Article 87(1) sets out criteria, all of which must be met for a State Aid to be present:

    *
      The grant favours certain undertakings or the production of certain goods;
    * The grant is provided through State resources;
    * The grant distorts or threatens to distort competition;
    * The grant affects trade between Member States.

If it is absolutely certain that one or more of these conditions is NOT met, then your organisation is not affected by State Aid rules.

Organisations not covered by State Aid

It is impossible to provide a categorical definition of this because each organisation will have to assess whether it is an undertaking. However, it can be stated that an undertaking is an organisation or individual that carries on an economic activity.

The following types of organisations will be undertakings for the purpose of the State Aid rules:

    * Sole traders;
    * Partnerships running a business;
    * Companies running a business.

However, it is likely that the payment of grants to organisations and public bodies which carry out the following functions and activities will NOT amount to State Aid:

    a. Organisations and public bodies which administer matters which are intrinsically prerogatives of the State (such as ensuring internal and external security, the administration of justice, the conduct of foreign relations and other exercises of official authority - Police Authorities & Government Departments);

    b. Organisations and public bodies which provide services where the State is not seeking to engage in gainful activity but is fulfilling its duty towards its own population in the social, cultural and educational fields (such as national education - Schools, NHS, GP surgeries & Local Authorities);

    c. Organisations and public bodies which provide services/schemes based on the principle of solidarity, which are non-profit-making and where the benefits paid are not proportional to the amount of the compulsory contributions (such as organisations charged with the management of State-imposed compulsory basic social security schemes);

    d. Organisations and public bodies which perform largely social functions, are not profit-oriented and are not meant to engage in industrial or commercial activity (such as the non-economic activities of trade unions, political parties, churches and religious societies, consumer associations, learned societies, charities as well as relief and aid organisations). Please note that whenever such organisations, in performing a general interest task, engages in economic activities then the State Aid rules can apply.

If an applicant is, or has been determined an undertaking it may still be eligible for a grant provided they can meet the de minimius or block exemption requirements as set out in Article 87 of the EC Treaty. Also see section 3 within the Terms & Conditions.

    * For applicants applying the "de minimis" requirements the total amount of grants received in the last three fiscal years (including the current year) does not exceed 200,000 Euros.
    * For applicants applying the "block exemption" the maximum grant is limited to 40% of the difference in eligible costs of installing the proposed technology compared to installing the fossil fuel alternative (40% of total projects costs minus fossil fuel equivalent (£40*kW).
      For example the eligible costs for a 45kW biomass boiler installation are £55,000. The fossil fuel deduction will be £1,800 (or 45kW*£40). The resulting grant will be £21,280 (or 40% of £53,200).

Examples The examples below provide guidance on the way in which certain types of organisation are likely to be classified. Please note that these examples are illustrations only and in each case you will need to assess your organisation's activities to determine whether your organisation is an undertaking.

Example 1

A community group owns and manages a community hall. The community group rents the hall out to local clubs and charges a nominal fee to cover electricity costs. The community group also arranges various fundraising events such as jumble sales and sponsored walks to raise funds for the hall. The community group does not raise funds in any other way. The community group is not an undertaking.

Example 2

A charity is set up to protect local wildlife. The charity raises funds through donations and by selling gifts through a mail order catalogue. All the profits raised by sale of goods through the catalogue are used to protect local wildlife. The charity is an undertaking because it carries on commercial activities by selling goods through the catalogue.

Frequently Asked Questions

How do public-private joint ventures (Public Private Partnership or "PPP") steer clear of State Aid concerns?

Due to the difficulties in determining whether organisations involved in PPPs are undertakings it has been decided that any organisations involved in these initiatives should ask for clarification from the LCBP2 team before applying info@lcbpphase2.org.uk.

Is funding to universities treated as aid?

Not normally: the funding of universities to provide teaching to students is not deemed State Aid. Neither the Universities nor the students (individuals) are considered to be "undertakings". However, where Universities enter into collaboration with firms, there may be State Aid present. There will be no State Aid where the firms pay a commercial fee for the use of University facilities or where the results of the collaboration are made available to all-comers, but otherwise, there is a danger of State Aid being present.

Why must we comply with the State Aid rules?

The State Aid rules work to create fair competition for UK companies in Europe. Application of the rules means that competitors in other EU Member States cannot receive unlawful State subsidies which distort competition. Unauthorised State Aid is illegal. These are the consequences for giving such aid:

    * aid payments can be suspended;
    * firms may have to repay the State with interest;
    * policies may have to be altered;
    * legislation may need to be amended;
    * a recipient could be sued by a competitor for damages.

I am still unsure about my organisation's status with regard to State Aid, Where can I go for further advice?

See http://www.berr.gov.uk/whatwedo/businesslaw/state-aid/advice/index.html for further details.

Last site update: 17th September 2009

http://www.lowcarbonbuildingsphase2.org.uk/page.jsp?id=14
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« Reply #4 on: June 27, 2010, 12:22:47 PM »

There's more clarification from the LCBP Phase II website - copied here just in case it disappears.  Why, on the basis of what this says, village halls have been asked to repay their LCBP Phase II grants in order to get FITs seems difficult to decipher.


Hi Ted,
Do you have an example of where a village hall has actaully been asked to repay the grant?  Being in Scotland we have other grant streams although broadly similar to LCBP, but as far as I am aware the possibility has been raised but no group has actually been asked to repay grant.

There is also the issue of de minimus levels which I would have thought most village halls and small and micro businesses would fall under
« Last Edit: June 27, 2010, 12:26:08 PM by swc123 » Logged
Ted
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« Reply #5 on: June 27, 2010, 02:37:30 PM »

In terms of people caught in the gap between 15th July and 1st April I only know of this one:

http://www.powerswitch.org.uk/forum/viewtopic.php?t=14396&highlight=

There are several projects I am currently connected with that are stalled in financial planning until the issue is clear beyond doubt. I agree with you regarding the de minimis issue but the previous guidance from LCBP was that most of these community groups should not be considered 'undertakings' in the first place - which would mean that the state aid regulations do not apply.

The same EU determination I quoted from above also states that FITs payments themselves are considered 'state aid' which can have major implications for any companies considering using it to fund renewable projects.
« Last Edit: June 27, 2010, 02:39:51 PM by Ted » Logged

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« Reply #6 on: September 10, 2010, 11:59:39 AM »

DECC have just published 'clarification' on the issue of FITs and grants.

http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/feedin_tariff/FITs_Grant/FITs_Grant.aspx

Good news for some in that the 'claw-back' of LCBP Phase II grants that had been required (for village halls and the like) is confirmed to be subject to the 200,000 Euro in 3 years de minimis rule. Whether this means that any group who have actually paid back their grant in order to qualify for the full FITs rate will now be able to get it back again is unclear.

Also there is clause iii - which gives a little wriggle room for some projects to get grants and FITs and not worry about the 200,000 Euro limit. But its not stated how you would actually go about demonstrating that your project meets those guidelines.  This applies directly to one major project I am currently involved with so I shall be seeking further clarification on the process involved in that.

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« Reply #7 on: October 11, 2010, 08:42:20 PM »

Hello Ted
I am on our local parish council and started a project some time ago to obtain grant funding for PV on the village hall roof. We were successful in getting part funding in the last round from BRE (Big Lottery) and plan to get the rest from the LEADER project.

When I put the case together I was aware that we would not qualify for FIT's because the project would be financed from the public purse and based our case on a 9p/kWh export rate from our electricity supplier.

When we obtained approval I checked this with our supplier and found that following clarification of the FIT scheme they no longer offered this rate (and probably neither does anyone else). Suddenly we had no income!

I have spent some time digging around before finding this forum and think we may actually qualify for FITs under the "de minimis" rule which states that grants up to 200,000Euros over three years can be ignored. As we are nowhere near this amount we may actually be able to claim FIT's when the scheme is commissioned! and our income would be quadrupled!

Can you confirm whether my understanding is correct? and direct me to any simple guidance which would confirm this use for use in our current grant application?

Thanks for any help.

Don
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Ted
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« Reply #8 on: November 08, 2010, 12:57:13 PM »

Hello Don,

sorry for not replying sooner but I have been busy on other things and missed this message.

DECC have issued some clarification on this which says that you can get grant + FITs as long as you meet the de minimis rules: http://www.decc.gov.uk/en/content/cms/what_we_do/uk_supply/energy_mix/renewable/feedin_tariff/fits_grant/fits_grant.aspx

Also have a look at the BIS government website for more guidance on de minimis: http://www.bis.gov.uk/policies/europe/state-aid/state-aid-de-minimis-notification-procedures

Note that the amount that is used to determine the 200k Euro limit is the grant plus 3 years FITs income.
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« Reply #9 on: November 26, 2010, 09:48:07 PM »

Thanks Ted that helps confirm our position; just waiting for the grant decision in December.
Don
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« Reply #10 on: December 15, 2010, 03:28:49 PM »

Hi Ted
Went to present our grant application and one of the panel stated that DECC were not happy with the "de minimis" rule and the situation is still unclear and went on to warn that if we received a grant for PV we might be required to pay it back to get FIT's. Cry
We seem to have gone full circle in six months.
Do you know anything about this?
Don
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« Reply #11 on: March 23, 2011, 03:00:00 PM »

We have now reached the ultimate stupidity in that at the final meeting our grant for the village hall was approved but the PV removed.
The draft contract stated that the PV would be included but that we must agree not to claim the FIT.
The PV was removed on the basis that, if we repaid the grant (in breach of contract!) in order to claim the FIT the grant repayment would not be returned to the body issuing the grant and be lost to them.
Both OFGEM and DECC have confirmed that if the grant is repaid it is returned to the issuing organisation and we are making an appeal on the basis that the reason for removing the PV was incorrect.
Anybody had similar experience or any advice to offer?
Incidentally, if we are prevented from claiming the FIT I guess we will need an export meter and can claim the 9p/kWh. Any guidance on how to do this?
Thanks for any help.
Don
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Ted
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« Reply #12 on: March 23, 2011, 04:51:42 PM »

Don, how much are you trying to get through grant?

The current situation, as explained to me by the person in OFGEM who wrote the de minimis declaration document, is this:

1. If you do not receive a grant that is specifically for the installation of renewables then you can claim the FiTs.

2. If you do receive such a grant then there are three situations where you can retain the grant and still claim FiTs. These are 'exemptions' from the general rule that you cannot have both grant aid and FiTs.

2.1 The grant is an "allowable grant" - such as LCBP under certain time limits.

2.2 The costs of the project are in someway 'extra-ordinary' - such as extra costs for environmental protection work (on a hydro scheme, for example) that is considered to be over and above the normal costs of such a project.

2.3 The grant, plus the first 3 years FiTs income, plus all other grants your organisation may have received that were declared to you to be 'de minimis' aid at the time it was awarded to you and was awarded to you in the 3 most recent fiscal years, must not exceed the 200,000 Euro 'de minimis' limit in any 3 fiscal year period. And 3 full years of FiTs income cannot exceed that amount either. Under this part both the grant given to you and the FiTs payments are declared by OFGEM to be 'de minimis' aid (something that I think is not lawful BTW).

If you are claiming exemption under that last part - as you are entitled to do if your project funding is under the 200,000 Euro limit, then you are required to sign a declaration (see below) that states this. You send this to your electricity supplier when you sign up for a FiTs contract with them (for systems up to 50kW or return it to OFGEM for > 50kW).

There are still some uncertainties over the timing issues in respect of the 'de minimis' exemption (that I haven't managed to get OFGEM to answer yet) - such as; if we simply wait for 12 months before applying for FiTs then can we ignore any amounts received in the year that has dropped off the 3 year term?

Here is the OFGEM 'de minimis' declaration that contains all the above summarised info - http://www.ofgem.gov.uk/Sustainability/Environment/fits/Grants/Documents1/de%20minimis%20declaration_130111_final%20for%20publication%202010_2011%20financial%20year.pdf

OFGEM have promised to re-write some parts of this that I think are misleading - but that hasn't happened yet. They have also said that the FiTs legislation will be re-written to account for these 'clarifications' to the original state aid clause in the FiTs Order.

As I said, I think that some of this approach is of dubious legality (such as retrospectively declaring a grant you may have already received to suddenly be 'de minimis' aid) but unless someone is prepared and able to challenge that under judicial review or similar, then OFGEM will get away with it.

[edit]  And if you cannot get FiTs income then the only other alternative is to negotiate a contract price in the electricity market. The 9p rate is only for those transferring from ROCs and is not available for new installations - if someone hasn't signed up for that by now then it is too late anyway.
« Last Edit: March 23, 2011, 04:57:44 PM by Ted » Logged

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« Reply #13 on: April 11, 2011, 09:33:20 PM »

Hi Ted
Sorry I didn't reply to this before, somehow I seem to have missed it on "replys to your posts". It would have been very useful at the time if I'd read it  Cry However I was able to get good information from both DECC and OFGEM and our appeal was based on the guidance given at the last meeting being wrong, using the information from DECC in particular.
Happily our appeal was successful and the panel have reinstated the grant for PV and accept that we have the right to claim FIT's under the de minimis clause.  extrahappy The only condition on the grant was that we must inform them when we apply for the FIT. This is a considerable advantage as the only rate I could get without the FIT was 3p/kWh!
The PV is ordered (5.2kWp) and we are putting in the roof bolts on Wednesday as the hall is a summer maternity roost for pipistrelle bats and we cant go in the roof space after the 31st.
To answer your question about the value of grants, we have about £35k from four different sources.
Thanks for your help, if you, or anyone else wants more information I would be only too happy to help.
Don
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Ted
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« Reply #14 on: April 12, 2011, 09:38:01 AM »

That is good news Don, thanks for letting us know (and cheering me up).
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