Industry in dismay as solar power business rates set to rocket from £400 to £2,700 a year

solar-power-clarke-and-kennedy-glasgow-pv-installersAverage rates for solar-power businesses – which generate and consume electricity generated on-site from their own rooftop solar panels – could rocket from around £400 a year to £2,700 a year, based on a typical 100kW installation, under a new government tax change.

The Solar Trade Association carried out the analysis of the government’s new draft business rates, which are formally published today on the Valuations Office website.

Included within the figures is an unexpected sharp hike in the solar part of business rates for organisations that use power themselves from solar rooftops that they own.

While business rates are devolved in Scotland to the Scot-Government, the Scottish valuation office is likely to follow its counterpart south of the Border.

An STA spokesman said: “This proposed tax hike has caused dismay in the solar industry and across the green economy. MPs from all sides of the House have raised the issue in parliament.”

Complex VOA classifications mean that owners of solar panels are split into two classes; those who ‘mainly export’ their power, and those who use the majority of power onsite on the sites which they occupy.

The STA has signed a Memorandum of Agreement with the VOA following close work on the fair treatment of ‘mainly export’ generators. This means that most solar systems exporting to the grid or via a Power Purchase Agreement to tenants will see a decrease in business rates, reflecting falling costs, and lower rates of subsidy.

However, great concern remains over the treatment of business and some public sector rooftops. Organisations that own their solar panels and use most of the power themselves – a highly efficient option – will see up to an eight-fold increase in the business rates they have previously paid for solar.

Paul Barwell, STA Chief Executive, said: “This threatens to damage the commercial rooftop industry and sting businesses taking action on climate change. It is up to Ministers to intervene to prevent red tape crippling the rooftop solar industry.

Green MP Caroline Lucas commented: “Hiking business rates for firms which produce their own energy from solar panels is a short-sighted move.

“Solar is a cheap and efficient way to produce energy, yet this Government is side-lining this hugely popular technology and now risks allowing it to be undermined. This tax hike will punish those businesses which are acting on climate change, and it should be rethought immediately.”

The STA is asking Ministers to table secondary legislation to apply similar exemptions as have been enacted for CHP. The STA is also asking for a permanent exemption from business rates for microgeneration. 

The good news for ‘export’ solar is that, in most cases, the rateable value will fall from 2017, some by as much as half. Rates should reflect the true value of the solar asset, as well as the income received. As both of these have fallen dramatically over the last five years for solar power, the rateable value has also fallen.

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