However, the failure to remove the vat applied to retrofitted domestic battery energy storage systems is a ‘missed open goal’ and likely to continue to harm the growth of residential storage.
Among the measures outlined in the Autumn Statement was that so-called ‘full expensing’ will be made permanent. This should help stimulate corporate investment in solar and battery energy storage systems (BESS).
Full expensing, which replaced the earlier ‘super-deduction’ regime, allows companies to deduct the cost of certain plant and machinery from their profits before paying Corporation Tax. Unincorporated firms can still claim up to £1m under the annual investment allowance, which should also extend to solar and batteries.
Cut waiting times
Solar Energy UK also backs plans to allow developers to pay local authorities for faster planning decisions, through greater use of Planning Performance Agreements, “or your money back,” as Mr Hunt said.
The Chancellor also acknowledged that “It is also taking too long for clean energy businesses to access the electricity grid,” announcing the Government’s response to the Winser Review of the UK’s power networks. He said that the measures laid out today would cut waiting times and secure billions of pounds of additional investment.
The review itself said that implementing its proposed measures to boost grid capacity would reduce energy bills by securing more affordable renewable energy. This announcement is welcome, as current waiting times for some solar farms and commercial-scale rooftop solar projects can extend into the 2030s, making them unviable.
“I am very glad to hear that the Government has accepted Nick Winser’s recommendations essentially in full. Not only will this plan stimulate investment in solar energy, but the removal of network construction delays should also reduce the impact on consumer bills,” said Chris Hewett, Chief Executive of Solar Energy UK.
“Taken as a package, today’s announcements add up to a real shot in the arm for solar power and renewable energy in general,” he added.
Missed opportunity for residential BESS
The Chancellor has unexpectedly missed at least one open goal to support decarbonisation and the economy: removing the anomalous application of VAT to retrofitted domestic battery energy storage systems (BESS).
Solar panels, heat pumps, insultation, draught proofing and certain other energy-saving equipment for residential use has been zero-rated for VAT since the Spring Statement last year. This also extends to BESS, but only when fitted as part of a new solar installation.
The rule has thus left more than a million homes with existing solar installations unable to benefit from the 20% tax rebate. This has harmed the growth of residential storage, which both maximises the savings available from solar power and facilitates the adoption of cheaper grid-balancing smart energy tariffs.
The omission is strange considering that the Treasury opened a consultation on removing the incongruous rule in March, following lobbying by Solar Energy UK and parliamentarians.
Likely to deter uptake
In debate on the Energy Prices Act 2022 last year, Liberal Democrat peer Lord Foster of Bath said: “With more efficient and cheaper batteries now available, it makes sense for those with older systems to add a battery. The solar energy their panels generate can be used far more efficiently to the benefit of the homeowner and the country overall. However, the 20% VAT rate is likely to deter many.”
Solar Energy UK will engage with the Treasury again to ensure that the rebate is extended in the forthcoming Spring Statement.