In an open letter signed by figures from across the U.K. energy industry, the Renewable Energy Association has called on Chancellor Rishi Sunak and the U.K. government to immediately cut value-added tax on various products related to renewables and energy efficiency.
The letter is signed by senior figures at almost 30 companies and associations in the U.K. energy space and calls on the government to expand its classification of ‘energy savings material’ products, which are eligible for a reduced rate of VAT, to include all elements of a residential energy system, including solar PV systems, heat pumps, biomass boilers, solar thermal, thermal storage, heat batteries, electric battery storage, and domestic electric vehicle chargers.
Along with expanding the category to include these items, REA calls for the temporary removal of any VAT on energy-saving materials to aid in the competitiveness of these products against fossil fuels and promote residential renewables in the short term.
Longer-term, the association is certain that (with initial support) costs for renewables will continue to fall and become more competitive. The letter states, however, that fossil fuel supplies for residential heating are currently taxed at 5%, while renewable energy products are subject to the usual 20% VAT, and further notes that energy storage, in particular, has never received direct support through an incentive scheme in the U.K.
The association sees tax reductions like this as essential in addressing expected energy shortages in Europe this winter, and in protecting consumers from currently volatile energy prices, particularly in the natural gas sector.
“The recent gas crisis has offered a sharp reminder of the severe impact that will occur if the UK’s energy transition moves without the pace or substance required. There has been a large impact on supply chains and businesses, and we are incredibly concerned about rising energy bills after this period of immense difficulty,” said REA CEO Nina Skorupska.
“The Government must take immediate action. It is our belief that one of the best ways to protect consumers from volatile energy prices is to give them the ability to install renewable energy and clean technology systems in their own homes. By reducing the dependency on gas and other fossil fuels, consumers should see their energy bills stabilise, as well as being able to contribute to the decarbonisation of the UK’s energy system.”
Lower-income households will be particularly at risk from rising energy bills, and REA further asks the government for more clarity on its forthcoming Clean Heat Grant, set to replace the earlier Green Homes Scheme, noting that the industry will need time to adapt the new scheme to ensure its success and warning not to repeat the failures of the earlier scheme.
“Unless steps are taken to increase the affordability of a number of technologies, the aspiration to install domestic zero-carbon energy systems will remain out of reach for many,” said Skorupska. “That is why the Government must remove VAT on domestic renewable energy and clean technologies no matter where they are installed. This would support the transition to net-zero, deliver new jobs and investment and protect consumers from volatile energy prices.”
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