Solar electricity campaigners are celebrating success in their struggle to remove VAT from domestic batteries retrofitted to homes already benefitting from PV panels.

Victory in the tax battle coincides today with standards body the MCS confirming 2023 has again smashed records for solar PV installations.

Up to early December, the Microgeneration Certification Scheme logged 183,022 certified PV installations this year, beating 2022’s full total by one third. Now an estimated 2 million UK homes, plus thousands of commercial buildings, make subsidy-free clean power on their roofs.

After years of representations from industry body SolarEnergy UK, the government this week corrected its anomaly of charging householders 20% VAT on power storage devices retrofitted to homes.  New generating equipment had long attracted 5% VAT at most.

As many as a million homes with rooftop panels may have been put off installing batteries, say installers, when confronted by the VAT anomaly.

From next February, VAT will no longer apply to domestic BESS, ministers announced. The concession also covers water-source heat pumps and diverters, a technology that redirects excess power from solar or other renewables to a specific load or appliance, usually a water heater.

Despite the VAT wrinkle, battery installations at both initial and retrofit stages have grown wings this year.  Today’s MCS figures reveal a total 4,400 of the nation’s 4,700 MCS-certified BESS devices were installed in 2023, nearly 800 in November alone.

Numbers of contractors accredited by the MCS to intall storage devices have mushroomed this year, from 50 in January to over 850 now.

Heat pumps, insulation, draught-proofing and other energy-saving equipment for home use have been exempt from VAT since the chancellor’s 2022 Spring Statement. The exemption also extended to purchase of home-scale batteries or BESS when installed at the same time as generating panels.

Falling prices of new home-scale batteries have mirrored the earlier drop in price of domestic solar generation.  That has led more and more homeowners with panels to approach battery installers in quest of increased savings from the generation kit.

Another knock-on effect, say industry reps, has been slowing home owners’ uptake of batteries for use in time-shifting and flex exercises, brought in by suppliers to relieve grid stress by paying homes to cut their electricity consumption or shift it into overnight use.

In a debate on the Energy Prices Act 2022 last year, LibDem 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.”

Trade body SolarEnergyUK had long lobbied on the issue, and were dismayed it had not featured in Chancellor Hunt’s Autumn Statement last month.

Chris Hewett, chief executive of the SolarEnergy UK trade group welcomed this week’s victory

“Although a long time coming, this is great news for sustainable energy in the UK“, said Hewett.

“Installing a battery energy storage system can double the savings offered by a home solar installation, so with energy prices as they are, retrofitting one is a great decision,” he said.

Heat pump installs hit records

Today’s MCS data shows installations of heat pumps are at record peaks, as consumers hedge against continuing high bills from suppliers.

More than 35,000 installations of air source or ground/water source technologies were registered in 2023. This figure brought the UK to over 200,000 certified heat pump installations since 2008.

Heat pump uptake remained high in the second year of the Government’s Boiler Upgrade Scheme (BUS), launched in May 2022 to encourage households across England and Wales An initial £5,000 incentive to strip out boilers was this year upped to £7,500.


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