A proposed quadrupling of the rate of VAT on renewable energy systems including solar panels could backfire by putting customers off going ‘green’, a leading energy expert has warned.
David Jones, whose Denbigh-based Hafod Renewables are specialists in the installation of new ‘green’ technologies, says the increase from five to 20 per cent will have little effect on cost for homeowners but could put many off installing systems.
The Government proposal is to increase rates on energy savings materials like domestic solar panels, biomass boilers and battery storage to 20 per cent to bring the UK into line with Europe.
David Jones who last year installed over 100 domestic solar systems across North Wales, said: “It will only apply where the cost of the materials for a project exceeds 20 per cent of the total cost which rarely happens for homes and it will stay at the lower rate for those over 60, those receiving benefits and care home, hall of residence and other ‘relevant residential purposes’ buildings.
“I think though that it will send a signal that the cost of a solar or other renewable system will be ballooning and that the Government are out to tax renewable energy.
“That would run contrary to the intention to cut our reliance on fossil fuels to zero by 2050 and may put many people off when it is even more important that people switch to renewable systems to achieve that target.
“The move seems unfair as electricity from coal and gas powered stations currently benefits from the reduced rate of five per cent.
“Fossil fuels such as coal and gas already have a million or so years head start on solar power so to tax solar in this way would be the same as giving a hare a 10 mile head start in a race with a tortoise!.”
The proposed increase, which is due to come into effect on October 1, will only apply to residential properties as solar and other systems on commercial properties including farms is already at 20 per cent.
The increase will be applied to installation equipment and materials, such as solar panels, ground and air source heat pumps, and micro heat and power units.
It has certainly upset the industry and Frank Gordon, head of policy at the Renewable Energy Association, said: “The proposed VAT rate hike hits the small-scale renewable energy industry hard during an already difficult landscape.
“This change risks setting back the UK decarbonisation of homes and businesses in the UK by a number of years.
“Despite recent mass climate-related protests and the UK parliament declaring a ‘climate emergency’, the government is again erecting a barrier to cutting emissions and increasing the costs for households who want to help.”
But David said: “We have seen a rush to solar in the first quarter of the year because the feed-in tariffs came to an end in April but I believe it will continue to be important because solar power can now hold its own against oil, gas and conventional electric competitors.
“It isn’t a Cinderella-style operation any more. It’s a real contender and one with a better, cheaper long-term future than fossil-fuel or even nuclear generated power.
“Scaring people off by announcing this VAT increase is dangerous if we want to maintain the momentum of the renewable revolution – especially when there really isn’t anything to fear for the average householder.
“The cost of solar equipment has plummeted by 60 per cent over the past seven years so the equipment cost rarely exceeds 60 per cent of the total cost.
“Costs for running a business, such as fuel, wages, insurances etc, have gone up over the years so the cost of delivering the project nowadays far outweighs the equipment cost.”