UK Government Unveils VAT Relief for Domestic Energy Storage Systems
In a significant move toward green energy efficiency, the UK government has announced plans to offer VAT relief on installing Battery Energy Storage Systems (BESS), including retrofitted BESS, which will become exempt from its 20% VAT from 1 February 2024.
This development goes beyond the previous VAT relief policy, limited to batteries installed concurrently with solar panels.
BESS has become indispensable for seamlessly integrating renewables into the grid, driving decarbonisation aspirations, and ensuring energy security.. AlphaESS products play a vital role in shaping a sustainable future. That's why we provide a comprehensive range of battery energy storage systems through our installer network that delivers unmatched and unrivalled performance, reliability, and efficiency.
Effective 1 February 2024, this new policy encompasses standalone battery installations and retrofitted batteries. This decision marks a crucial turning point for the energy storage sector, signifying a pivotal moment in the UK's transition toward cleaner energy.
In the Spring Statement 2022, the government initially expanded VAT relief on energy-saving materials (ESMs). However, this expansion wasn't comprehensive enough. Responding to industry calls, the government conducted a Call for Evidence (CfE) to gather opinions on potential areas for further reform. As a result, the government is extending the relief to include:
- Electrical battery storage
- Water-source heat pumps
- Diverters retrofitted to ESMs, such as solar panels and wind turbines
Including tax relief on battery storage systems is a game-changer for AlphaESS and the BESS supply industry. Finally, there is recognition that battery storage is an essential element in the UK's drive towards renewable energy solutions. Battery storage is integral in supporting the UK's clean energy transition and, until now, has been overlooked in previous government initiatives. This change sets a promising tone for a more energy-secure future.
The expansion covers various types of battery storage installation projects
Battery storage installed with solar PV
These are projects where battery energy storage is added during solar array installation. The zero VAT will benefit homeowners who can fully utilise solar and storage benefits, reduce their outlay or use the savings to install more solar PV or upgrade the BESS system, maximising their renewable investment, optimising energy consumption, and storing excess energy for later use, creating a more robust renewable energy solution.
Battery storage installation - Standalone
Standalone is a relatively new method of incorporating battery storage installation without accompanying solar panels. Homeowners can leverage smart tariffs to charge their batteries at cheaper rates overnight when the cleanest and lowest-cost energy is available. They can then discharge stored energy during peak hours, alleviating grid strain, reducing fossil fuel usage, and saving on energy bills. It is a more cost-effective solution with zero VAT, and AlphaESS installers are already reporting many more installations of this type.
Retrofitting Battery Energy Storage to existing solar PV
Adding AlphaESS battery storage to existing solar arrays allows billpayers to harness solar energy throughout the day and night, leading to significant energy bill savings, reduced carbon footprint, and better control over energy usage. It contributes to a cleaner and more manageable grid.
Mark Hale, MD at AlphaESS UK, commented, “This is a positive move by the government in the development and expansion of renewable technologies across the country. It will be a boost for customers with lower prices and will help drive further growth across our industry. AlphaESS UK supports this decision to help deliver our mission to support customers in the drive to net zero across the commercial and residential sectors throughout the UK”.
