It has been announced that following the government’s cut to subsidies, the amount of household solar power capacity installed over March and February fell by three quarters.
The decline was expected after a 65 per cent reduction in government incentives paid to householders. According to data published by the energy regulator in mid-April, there was a total of 21 megawatts (MW) of small solar installed in both February and March.
Falling demand for solar industry
In the same period last year, 81 MW of solar energy was installed throughout the country, despite government claims that the changes where necessary to protect bill payers, as the solar incentives are levied on household energy bills.
Lisa Nandy, shadow energy and climate secretary said:
“The chancellor ignored the warnings and slashed support for this important industry in the clear knowledge it would cause job losses and deter investment. These figures show the damage his decision is causing.”
David Pickup, business analyst at the Solar Trade Association, pressed that there was still reason to be optimistic however, saying that, “we are confident that solar can still provide an attractive investment in certain circumstances and that the market will recalibrate by selling solar as a package with other smart cutting edge technology.”
Solar energy reforms
In other news, the European Commission has set out new reforms that could lead to the UK retaining the reduced VAT rate for solar voltaic panels (PV). The new plan intends to reduce the administrative burden for businesses, which should enable an increase in autonomy to Member States in how they grant lower rates of VAT.
This is good news as HMRC proposed in December 2015 that it would hike VAT on domestic solar PV and solar thermal installations from 5 per cent up to 20 per cent, following a European Court of Justice ruling that the UK’s rules on VAT on energy weren’t in-line with EU law.
Leonie Greene, head of external affairs at the STA, said that:
“Increasing VAT on solar to 20% while retaining 5% for grid electricity, gas and oil defies all logic, which is why the STA has consistently taken a strong line on this issue. The Chancellor can and should stand up to Brussels on this – lower VAT on domestic solar is within the guidelines set out in EU law.”
“We hope that Treasury will issue an official statement confirming the Government’s intention as soon as possible, as HMRC is still in theory considering responses to the consultation on this.”
“We also want to see the reduced solar rate of VAT in black and white in the Finance Bill later this year. What prospective solar homeowners and the industry needs more than ever is certainty – we need to know for sure.”
It has been estimated by the STA that the increase would have added £900 to the cost of a typical PV installation.