Ministers urged to cut VAT on batteries for homes after Brexit

The UK should reverse the increase on home energy storage systems implemented by the EU last year after Brexit, trade bodies representing the energy industry have told ministers.

The increase in VAT on the technology was introduced by the EU in October 2019, in a move that bodies including the UK’s Renewable Energy Association (REA) criticised.

With the end of the Brexit transition period on the horizon, the REA has garnered the support of more than 30 companies across the UK’s energy sector to call for better support for home energy storage – not only in recognition of the net-zero target, but in a bid to kick-start investment in the sector following a Covid-19-related slump.

In an open letter sent to Ministers on Monday (21 December), the REA and companies such as Powervault and Moixa argued that VAT on home energy storage should be lowered to 5%. This is the same level of VAT currently applied to electricity delivered to homes, and to fossil fuels supplied to off-grid homes.

The letter also posits a “temporary incentive, developed in consultation with industry”, for home batteries. Such a move could change opinions on flexible energy technologies and prepare homeowners for incoming energy standards, the signatories argue.

Signatories are floating the idea of the incentive scheme being embedded into the Green Homes Grant, which Chancellor Rishi Sunak recently extended for a second year. The Green Homes Grant scheme covers two-thirds of the cost of verified energy-saving home improvements for those who do not live in social housing. This proportion rises to 100% for the poorest households, with each household able to claim a maximum of £10,000. 

Businesses giants including EDF Energy, National Grid ESO, Schneider Electric and Nissan Motors GV have joined the REA and flexible energy technology providers in signing the letter. The call to action has also received strong backing from community energy groups.

“Domestic energy storage is a key enabler for solar, heat pumps and EV charging in a smart home eco-system – yet there remain challenges to deploying it at scale, including that such projects are not eligible for a reduced VAT rate, unlike other technologies,” REA chief executive Dr Nina Skorupska said.

“Energy storage has so far not received any support from a dedicated Government incentive scheme, despite being acknowledged as a crucial building block for the energy transition and the UK achieving net-zero.”

As a result of the Covid-19 pandemic, the global energy storage sector has been growing far more slowly than expected during 2020. The UK Government’s response to date has focussed on larger scale arrays; BEIS moved in summer to ease planning restrictions for utility-scale batteries, permitting cells over 50MW in England and arrays over 350MW in Wales.

Sarah George