The Current Situation
In 2015 the EU ruled that a discounted tax rate for energy saving materials, such as domestic solar panels and battery storage, was illegal. This week the government announced plans to bring the UK in line with this legislation which could result in a VAT increase from 5% to the standard 20% on all energy saving materials. If the policy comes into place the new rates will take effect from 1st October 2019 which is coincidentally the same month as the UK’s deadline for leaving the EU. However, the proposal is yet to be passed and is currently being contested by the Renewable Energy Association amongst many others.
It’s important to note that this proposal would not apply to people who are undertaking new build or renovation projects that qualify for zero-rated vat. So, who is likely to be affected by this change in policy if it does come to fruition? Well anyone undertaking a project where the technology costs of installation are above 60% of the total project price could see the VAT amount increased to 20%. However, all labour costs associated with a project will remain on the 5% VAT rate.
The consultation for this legislation was completed in April (8th April – 3rd May) and since then we have seen the urgency for action on climate change gather significant momentum. The focus on initiatives such as the Extinction Rebellion and activists such as Greta Thunberg have helped to shine an integral light on the need for decarbonisation. This movement will hopefully add weight to the argument against implementing the proposed increase. Wheels are also in motion to replace the Feed in Tariff with an initiative named the ‘Smart Export Guarantee’ (SEG). The SEG would make it mandatory for electricity suppliers to purchase excess electricity exported to the grid from small-scale low-carbon generators, such as solar PV panels. It’s hoped that this policy will encourage homeowners to become renewable electricity generators and equally take ownership over their energy.
Where we stand
At Evergreen Energy we believe that as a nation we should be doing everything we can to guard against climate change. The impact that the increase in VAT levy could have on the uptake of renewable technologies for many houses is a definite concern. The UK has made a tremendous effort to reduce our carbon emissions with the government stating that a record 50.1% of electricity was generated from low-carbon sources in 2017 (up from 45.6% in 2016). The proposed plans add another level of restriction to consumers purchasing renewables and risk setting back the positive actions made so far to encourage homeowners to go green. We are well on the path to decarbonisation and should be doing everything we can to actively secure a sustainable future.
‘At Evergreen Energy we are trying to plan for a future where renewable energies are affordable and work without subsidies.’ Helen Boothman, Managing Director