Committee welcomes possible VAT rules change on battery storage when installed after solar panels

From the Environmental Audit Committee

In a welcome move, the Government has confirmed that it is consulting on a change to VAT on energy-saving materials which could boost the capacity of householders to use solar energy to power their homes.

Earlier this month the Environmental Audit Committee (EAC) wrote to the Energy Security and Net Zero Secretary, Rt Hon Grant Shapps MP, to set out its findings following a short inquiry into the prospects for technological development to deliver more clean energy from solar installations. Within the letter, members called for VAT to be removed on battery storage, when installed either new or retrospectively in conjunction with rooftop solar systems in order to make better use of household-generated solar energy.

The Committee also outlined its concerns at the current constraints on expanding access to the National Grid, amid fears that present capacity and current arrangements to expand the grid will not allow the UK to reach its full renewable energy potential. Members heard how in some cases, it is taking 10-15 years for solar developers to secure a grid connection.

In a letter to the Committee, published today, the Energy Security Secretary outlines work currently underway to address grid concerns, including workstreams incorporating Ofgem, network companies and the Electricity Systems Operator. EAC will monitor progress within these workstreams in the course of its current inquiry into Enabling sustainable electrification of the UK economy.

EAC found in its work on Technological innovations and climate change: Onshore solar energy, that many households are struggling with the upfront costs of solar installation. As a result, Committee members recommended that the Government consider consulting on how it can facilitate affordable loans for households. In response, the Energy Security Secretary confirms that the Government is exploring options for facilitating low-cost finance from retail lenders.

While the Government is reluctant to incorporate installation of solar PV as a minimum requirement within the Future Homes Standard, the Energy Security Secretary does expect that developers will choose to install solar on rooftops to comply with new energy efficiency standards.

Environmental Audit Committee Chairman, Rt Hon Philip Dunne MP, said:

“Solar energy is now the cheapest form of power, and the future is bright to make the most of the technology both on the ground and on rooftops. Onshore solar is an invaluable component of the country’s Net Zero Britain ambitions, and I am pleased that the Government is committed to fulfilling its aim to increase capacity to 70GW by 2035.

“Earlier this month we wrote to the Energy Security Secretary with some recommendations to help the UK meets its solar potential. It is very welcome that tangible steps are being taken to address grid constraints and proper consideration is being given to ease the financial burden on households who may choose to install rooftop solar.

“The issue of VAT on batteries being installed after solar panels is an issue that has been raised multiple times within our Committee’s work. I am therefore very pleased that this is being considered in the Government’s consultation on VAT on energy saving materials, and the Committee will be making representations to the Chancellor of the Exchequer to highlight the evidence we have taken on this issue”