The European Court of Justice last week ruled in favour of a legal attempt by the European Commission to outlaw reduced VAT rates on energy-saving products for the home, which could drive up the cost of renewables for UK consumers. Phil Hurley, managing director at NIBE, warns that the decision could be a significant setback for the heat pump market – and urges industry figures to pull together against it.
The effect of the EU ruling will not likely come into force until March 2016.
Phil said: “At NIBE, we find the EU’s decision to outlaw the current reduced VAT rate on energy saving products very concerning. The heat pump market has been making real progress in recent months and years, and growth since the domestic Renewable Heat Incentive came into force in 2014 has been particularly strong. Despite the scheme’s slow start, it is now flourishing and applications are steadily on the rise – so this proposed change in legislation is particularly disappointing as it has the potential to slow uptake going forward.
“As the nation strives to clean up its energy supply and achieve the carbon reduction targets set out by both the EU and the UK government, now is certainly not the time to abolish a policy that is in place to encourage people to make their homes more efficient. Upping the VAT rate on energy-saving products from the current five per cent to a potential 20% could have a knock-on effect on consumers – causing the upfront costs associated with investing in heat pump systems to rise. Not only this, but given that Department of Energy and Climate Change has based its RHI tariff system on the current five per cent VAT rate, it could also have a major impact on RHI returns.
“As a renewables manufacturer, at NIBE we implore other industry stakeholders to join us in making our collective voice heard to UK policymakers. The message is loud and clear: opposing the EU’s decision needs to be top of the agenda if we are to reduce the UK’s carbon footprint for the long term.”