Renewable Obligation Accredited Projects - the ongoing importance of due diligence

It has been over nine months since the renewables obligation scheme closed to all new solar PV projects in England, Scotland, and Wales

Yet, as developers and investors take their accredited projects to market, understanding the finer details of the significant financial commitment grace period remains as important as it has ever been.

For those projects relying on the significant financial commitment grace period and commissioned between 31 March 2016 and 31 March 2017 (for projects 5MW or under), or between 31 March 2015 and 31 March 2016 (for projects greater than 5MW), evidence needed to be submitted to Ofgem alongside the accreditation application to prove the project met the relevant criteria[1]

For a standard non-private wire project, this evidence typically included:

  • a grid connection offer and acceptance both dated prior to 13 May 2014 (above 5MW) or 22 July 2015 (5MW or below);
  • proof of the planning permission application for the project being submitted and received by the relevant planning authority prior to 13 May 2014 (above 5MW)  or 22 July 2015 (5MW or below), alongside a copy of the corresponding final planning permission as granted; and
  • a signed declaration from the operator of the project stating that, to the best of their knowledge and belief, the developer, or a person connected with the developer, held the relevant land rights as at 13 May 2014 (above 5MW) or 22 July 2015 (5MW or below).

What is important to note here is that, although Ofgem will have reviewed the above evidence, asked any follow up questions and then granted accreditation based on their assessment, this is by no means the end of the road as far as guaranteeing accreditation for the life of the project is concerned.

Ofgem can conduct an audit at any point of the project’s accredited life to ensure that accreditation has been correctly awarded. Ofgem has confirmed that this audit can cover any matter relating to accreditation, even going so far as to look behind the land rights declaration described at bullet point three, above.

It is therefore important that buyers of such projects carry out their own due diligence and don’t rely on the fact that accreditation has been awarded. The main items to look at typically revolve around what the initial accreditation assessor won’t have seen, including:

  • Was there a variation to the planning permission after it was granted, which affected the material nature of the project?
  • Was there a sufficient agreement in place in respect of the land rights, such as an exclusivity agreement, or an option for lease, which can serve to evidence the declaration?
  • Have land registry searches been carried out to ensure that the counterparty to such land rights agreement actually owned the relevant land?
  • Do the land rights cover the entirety of the land over which the planning permission was granted?
  • Were any further grid connection offers required for the operation of the project?

This is not an exhaustive list, and an adverse answer to one of the above questions does not necessarily mean that the project is at risk of losing accreditation. However, they are important points for any potential acquirers to consider at the due diligence stage.

When acting for potential acquirers, the TLT team ensures sufficient due diligence to understand what, if any, risk exists around a potential adverse audit on a project's accreditation status.

Contributor: Nick Rains, Chartered Legal Executive – Corporate

[1] It is important to note that <5MW projects accredited between 22 July 2015 and 31 March 2016 must have also met the significant financial commitment grace period in order to qualify for grandfathered RO support. However, no evidence of this needed to be submitted to Ofgem alongside the accreditation application. Extra care therefore must be taken when reviewing the relevant documents as Ofgem will not have seen them, and their suitability will be vital to ensuring the project's ROC support level does not decrease as a result of future banding reviews.

Date published

08 January 2018



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