Government could slash VAT on Battery Storage Systems to 0% after MPs urge action

June 30, 2023 by Greg Bishop

NGRE welcomes exciting news last week that the Government is consulting on potential changes to the Energy Saving Materials list, and specifically the addition of battery storage systems.

Battery storage systems are now seen as crucial to the efficiency of solar installations but do not feature on the Government’s list for a 0% VAT rating if not installed with PV technology.

The move to add the technology comes after a dialogue between Energy Security and Net Zero Secretary Grant Shapps MP and Chairman of the Environmental Audit Committee (EAC), Philip Dunne MP, in which the EAC recommended that the Chancellor slash VAT on household battery storage to 0%.

Battery Storage “Crucial” to Solar PV

Following an inquiry by the EAC, the committee wrote to Mr Shapps arguing that “widespread uptake of household battery storage is going to be crucial to realise the full benefits of solar PV” and that reducing VAT would increase uptake of the technology and help meet Government targets.

Battery Storage Targeted for 0% VAT

Now, the Government is carrying out a consultation (VAT energy saving materials relief – improving energy efficiency and reducing carbon emissions) to look at whether additional renewable solutions and technologies should be added to the list, with battery storage one of those being specifically targeted.

Following the announcement, Mr Dunne said: “The issue of VAT on batteries being installed after solar panels is an issue that has been raised multiple times within our Committee’s work.

“I am therefore very pleased that this is being considered in the Government’s consultation on VAT on energy saving materials, and the Committee will be making representations to the Chancellor of the Exchequer to highlight the evidence we have taken on this issue.”

NGRE Welcomes “Massive Difference to Customers” and the Industry

Greg Bishop, Managing Director of NGRE, said: “If the change does happen it would make a massive difference to customers who either could not afford or initially did not want a battery installation when they had their PV installed and now want the complete solar solution.

“We might see the same growth in storage systems that we have seen with PV over the last year since the introduction of the VAT discount.

“Generally, owners reduce their energy spend by about 25% with a standalone PV system, which can be increased to as much as 60, 70 or 80% with the addition of a battery – it’s quite considerable.

“It’s green technology as well, the energy savings obviously making a positive impact on their carbon footprint.”

NGRE estimated that one of its most recent customers would generate 31% of their own electricity needs with a PV system alone but this jumped to a massive 84% with battery storage. Battery storage systems allow excess energy generated by PV systems to be stored and used later, when demand exceeds production, including during the night.

0% VAT on PV Helped PV Uptake

In March 2022, the Government introduced of a zero-rate of VAT for the installation of certain Energy Saving Materials effectively providing a 20% discount on the installation of solar PV.

However, battery storage technology was omitted from this list of qualifying materials and so although the VAT discount is available to those wishing to install solar and battery storage together, it is not available to anyone who wishes to install it subsequently as a standalone product.

Greg said: “There has been a large growth in the uptake of PV in the last year and this has been fuelled by high electricity bills but also by the VAT discount on the Energy Saving Materials.

“If you already had solar and then decided you wanted a battery at a later date, that would be charged at 20% VAT which has obviously put a lot of people off.”

Battery Storage Increases PV Efficiency

Greg added: “I don’t know why storage was omitted from the list because it can massively increase the efficiency of a standalone PV system.”


Battery Storage

The EAC recently conducted an inquiry, “Technological innovations and climate change: Onshore solar energy”, looking at how to accelerate the growth of PV technology to help achieve the Government’s target of 70 gigawatt of generating capacity by 2035.

Following the inquiry, EAC Chairman, Philip Dunne MP, wrote to Mr Shapps calling for a number of measures to be taken, including VAT to be removed on battery storage.

Mr Dunne said: “Widespread uptake of household battery storage is going to be crucial to realise the full benefits of solar PV.

“We recommend that the Chancellor of the Exchequer extend the VAT discount to household battery storage at the next opportunity.”

Are you Interested in domestic renewable energy with a solar PV system and Battery Storage System? Or an EV charging point?

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NGRE specialise in the supply of the latest renewable energy solutions for homeowners, architects, builders and community projects in Oxfordshire and surrounding areas and have more than 10 years’ experience.

NGRE are solar suppliers and solar installers, battery storage suppliers and battery storage installers, EV charge point suppliers and EV charge point installers.