The Spring Budget Sheds Light on Solar Energy VAT and Upgrades

Hooray, we’ve had a breakthrough! Solar Energy UK’s dedicated lobbying has finally sung to the melody of change. The government has reconsidered its stance on VAT for battery storage.

As part of the Spring Budget, the Treasury has extended an invitation for evidence. The proposal? To stretch the current zero VAT rating – currently gracing solar panels, heat pumps and insulation – to cover battery storage. Now, this covers cases where it’s retrofitted to a solar photovoltaic system or even installed as a standalone unit.

This was not a snap decision. It’s a result of persistent calls from Solar Energy UK and Parliament to bring about a change in VAT policy for battery storage.

Introduced in the Spring Budget of 2022, the current exemption only considers battery storage that’s fitted alongside solar power. This poses a discouragement to people who intend to provide battery upgrades to their existing solar systems in homes and commercial vicinity. Lord Foster of Bath nailed it last September when he said it didn’t make sense to incentivise installing a battery at one moment and not the next.

This week’s Spring Budget also revealed more exciting news! Companies can now “fully expense” certain investments, incurring the cost in one fell swoop. It’s been confirmed by the Treasury that this three-year allowance would embrace solar energy.

Our sector would likely also benefit from a £63 million Swimming Pool Support Fund. This Fund will boost energy efficiency upgrades for pools, helping to cut down their operating expenses – something that has outrageously soared during the past year.

Despite these encouraging highlights, the Spring Budget hasn’t met all expectations for the clean energy sector. It seems an investment in upgrading the UK’s antiquated electricity grid has been sidelined. Instead, the focus has been on carbon capture, storage, and costly nuclear power, which could pump the brakes on private investment in rooftop and ground-mounted solar systems.

While there are some real nuggets here – the VAT exemption for battery storage, and opportunity for solar thermal in swimming pools – the Budget hasn’t fully aligned with the fundamental shifts happening in global energy transition.

Chris Hewett, the CEO of Solar Energy UK, pointed out the essential needs for public and private investments in reinforcing the power grids. The slow progress of upgrades is evidently pushing the completion timeline of some solar projects well into the 2030s. We urge the government not to dim the lights on the solar sector and instead, increase their focus on solar, wind, and energy storage. Here’s hoping for a brighter and more renewable future!