Sighs of relief as solar power sector dodges VAT rise – for now

In-roof solar PV panels installed at the Glasgow Commonwealth Games
In-roof solar PV panels installed in new-build homes at the Glasgow Commonwealth Games

The decision on a Government proposed increase in VAT rates for domestic solar systems was absent from the Budget today – raising hopes for a Treasury re-think, which the Solar Trade Association has been strongly pushing for.

The association has been told that Treasury has delayed its decision, but will make a decision by Autumn.

Last week the European Commission mooted fundamental reform of EU VAT rules, which have weakened the already poor justifications given for raising VAT on solar.

If enacted, Treasury’s proposals would see UK families paying more VAT for going solar than for buying power off the grid, or for heating their homes with fossil fuels – a perverse outcome given climate change and OECD promises to end distorting subsidies for fossil fuels.

 Paul Barwell, STA Chief Executive, commented: No VAT news on Budget Day is good news.

“This delay means we can continue to make the very strong case for Treasury to abandon plans to hike up VAT on solar. It makes no sense to penalise British families that want to take meaningful action on climate.

“The Energy Department (DECC)  is on record saying they will’ look again’ at support levels for domestic solar if VAT rates are increased so households should be assured it will still pay to go solar whatever happens.

“However, the VAT increase should not go ahead; it would delay the point at which solar will not need public support in the UK and that would be an own goal.”

Meanwhile, the STA has given a warm welcome to the Chancellor’s acceptance of the National Infrastructure Commission’s recommendations on Smart Power.

Lord Adonis’s report shows that a flexible power system, incorporating storage, could save consumers £8billion per annum by 2030. It also showed that a more flexible system combined with renewables could deliver power more cheaply than nuclear power.

Barwell added: “A smart power system requires active management of local networks – essential for the effective connection and management of solar on the grid.”

Pixie Energy

Pixie logo Pixie Energy is an incubator and a facilitator of strategic research and project work, focusing on energy regulation, policy and markets at the local and national level. Find out more about Pixie Energy here.

Local Energy Matters: Scotland

Local Energy Matters: Scotland is a free-to-download brochure with a focus on energy tariffs in the two Scottish electricity distribution regions, as well news on local energy and low-carbon schemes.

Previous editions can be download here.

Scottish energy market overview

You can read an overview of the Scottish energy market here.

Scottish Government energy feed