Call for domestic energy storage VAT cut

The Association for Renewable Energy and Clean Technology (REA) and a coalition of industry groups have urged the Government to reverse the rise in VAT on home energy storage that was implemented in October 2019 to comply with an EU ruling, now that the UK can set its own rules on VAT.

There has so far been no dedicated support for energy storage devices despite the dual pressures placed on the industry by the rise in VAT and the pandemic.

The coalition’s letter to the Government highlights that a thriving storage industry could enable the delivery of up to 86,000 energy sector jobs in the energy transition (REA REView publication 2020) and boost UK manufacturing.

The letter is signed by over 30 companies and organisations across the energy industry having been developed by a working group chaired by UK smart energy and storage company, Powervault, alongside other industry leaders such as Moixa and Good Energy. The asks are supported by major companies such as EDF, Nissan and Lightsource Labs.

The two requests are:

1. For VAT rates on home energy storage to be lowered to 5%, in line with domestically used electricity & heating from fossil fuels (for example, coal burned in the home).

2. For a temporary incentive, developed in consultation with industry and to appropriate standards, to encourage householders to install home energy storage, such as inclusion in the Green Homes Grant or a scheme equivalent to grants available for EV ownership, or EV charging equipment.

Dr Nina Skorupska CBE, Chief Executive of the Association for Renewable Energy and Clean Technology (REA), said:

“Domestic energy storage is a key enabler for solar, heat pumps and EV charging in a smart home eco-system yet there remain challenges to deploying it at scale, including that such projects are not eligible for a reduced VAT rate, unlike other technologies, such as fossil fuel heating.

“Energy storage has so far not received any support from a dedicated Government incentive scheme, despite being acknowledged as a crucial building block for the energy transition and the UK achieving net zero.

We believe energy storage should be included in the Government’s national package of stimuli measures, along with renewable energy technologies of all kinds.”

Joe Warren, CEO at Powervault, said:

“Home energy storage is a key part of our journey to net zero as we need to store renewable energy to power and heat our homes and fuel the increasing number of electric vehicles.  Locating energy storage in the home also supports the network and is a key enabler for the roll out of more solar PV and electric vehicles.  It doesn’t make sense that VAT rates for coal and gas supplies, when used in private homes, are 5% while energy storage has a VAT rate of 20%.  It’s imperative that home energy storage can operate in a level playing field – rates of 20% make this more difficult.

“Secondly, until the roll-out of smart meters and half hourly settlement when home electricity prices reflect the disconnect between when the wind blows and the sun shines and actual electricity demand, home owners with domestic energy storage will not be properly rewarded for storing “cheap” low carbon electricity and reducing their use of “expensive” high carbon electricity at times of peak demand, so temporary support is needed until this situation changes.”

Read the REA and coalition’s letter to Government here: Joint letter – Fair Treatment for Home Energy Storage

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