HM Treasury has recently intervened to block the Department for Education (DfE) from approving all Power Purchase Agreements (PPAs) for solar installations in schools—treating them as public borrowing now requiring government approval.
CEE mobilised DESNZ officials and ministers once we became aware of this on Friday 11 July.
The official line at the moment is, “The government is considering the fiscal and budgetary impacts of the borrowing associated with solar PPA projects. Until the position has been determined there is a pause on consenting to any NEW applications for solar/PPA on school sites.”
“The projects concerned will get an update in due course.”
We understand that a short-term work around will be put in place so that these installations can take place. CEE would welcome this temporary fix.
Happening just before the crucial summer holiday installation window, without a government solution, this block would have prevented installations on at least 25 schools. A number of community energy organisations were exposed to significant losses from sunk costs and contracts entered into, which in some cases could have bankrupted those organisations. It would also have resulted in a waste of government grant money, in feasibility and development of these projects.
If any projects are or will be affected by the delay in permitting from DfE and could use any kind of help, official or financial guarantee to enable them to proceed with their installation on schedule, please urgently contact Josh Barnes with details of what you would need.
The long-term problem however has not gone away.
This interpretation of the International Financial Reporting Standard (IFRS) 15 may affect any renewable energy projects with a PPA on public buildings or land. PPAs and public and community buildings are key to community energy’s business model, and to a lot of commercial low-carbon projects. The government might even have to work out the liability implied by all live PPAs. So it could very seriously impact our sector’s viability and indeed the progress of net zero.
We have asked for the Treasury rationale on this given that PPAs are not counted as debt in any other country we know of.
Apparently work is under way to identify the problem in detail, who it will impact and the scale, and to come up with a long-term solution. This may be standardised lease and PPA agreements that the Treasury and relevant departments have signed off. This might save time with legal departments by standardising the risk and responsibilities. However it ignores that every community energy project is different.