Call for tax breaks extension for energy saving materials

By Rob Horgan

The government is being urged to provide tax breaks for a wider range of energy saving materials.

In a joint letter to the Treasury, the likes of EDF, Ovo and Eon call for tax relief for energy saving materials to be extended for technologies such as batteries, smart thermal stores and home electric vehicle chargers.

The list of technologies on the Energy Saving Materials list are exempt from VAT. However, the list has not been updated since 2006.

The joint letter – coordinated by Thermal Storage UK – says that updating the list will increase the uptake of low carbon technologies which will assist in achieving the UK’s net zero ambitions.

“Modernising the technology list for energy saving materials would help the UK government and Ofgem to achieve their aim of a smart, flexible power system,” the letter states.

“The government has ambitious targets to go further and decarbonise the power system by 2035 as part of the UK efforts to tackle climate change.

“This requires more demand products that can best adapt to the intermittency of renewables. These products can provide flexibility to help to reduce infrastructure upgrade costs for the distribution and transmission system.

“Adding these flexible products to the technology list would reduce costs for consumers, remove competitive distortions and minimise perverse scenarios for installers of low carbon technologies.”

The letter cites existing tax irregularities when it comes to installing smart thermal stores as a prime example of why reform is needed.

It adds: “Today, a smart thermal store is zero-rated when installed as part of a heat pump system and a battery is zero-rated when installed with a solar panel array. However, households pay 20% VAT for the same products when added to an existing heat pump system or solar panel array.

“This extra 20% acts as a disincentive for people to add flexible demand products to improve the efficiency of their system and to efficiently use renewables through the wider electricity system.”

As well as expanding the technology list, the group of 24 signatories recommends that the temporary zero-rating of energy saving materials runs until 2030.

Ovo chief commercial officer Mat Moakes said: “There’s a huge opportunity to help consumers on the Path to Net Zero by making crucial zero carbon living technologies like smart thermal storage and EV chargers more accessible for everybody. Technology is developing at a rapid pace so the net zero home is already a reality.”

Tom Lowe, founding director at Thermal Storage UK, added: “Modernising the technology list to include smart thermal stores will reduce the cost of buying these products and make it easier to deliver a smart, flexible electricity grid”.

Full list of signatories: