Submission to HM Treasury on Budget 2018

This submission repeats much of our 2017 submission given no progress has been made to remove barriers to solar power, most of which fall under the Treasury’s remit. Since then deployment in solar PV has fallen to an eight-year low, with just 200MW of deployment expected for 2018 – a fall of 95% compared to 2015. The largest companies are now struggling to maintain an installer base. The need for a fair and level playing field for solar is urgent.

Solar power is the largest clean energy market in the world and the fastest growing energy technology. The UK is now ranked last for market prospects out of 20 established international markets in the Global Market Outlook 2018-2022. It is also the only country designated a negative political environment. We urge the Government to take a positive approach to this technology which is a major engine of clean growth globally and where the UK urgently needs to strengthen its position in international markets.

High volume markets drove down installed costs and have brought the industry to the cusp of being cost competitive with all other generation technologies, without the need for subsidy support. However, since 2016, there has been no clarity in future policy direction and a range of unhelpful policy changes which have caused significant uncertainty amongst investors and a dramatic drop in the levels of deployment.

Solar power is a central part of the UK’s transition to a flexible, low carbon energy system. In combination with battery storage and electric vehicles, it is central to cost-effective decarbonisation of the heat and transport sectors as well as electricity. The costs of solar are weighted towards capital investment at time of installation and so the certainty of policy environment is a vital factor in the market dependent on the long term investment of all sizes, from homeowners to billion-pound investment funds. The economics of different sub-sectors in solar are all distinct and for each there need to be a level playing field in terms of market access, tax treatment and regulations.

The industry is not asking for subsidy – we are asking for fair treatment, fair market access and level playing fields.

It is in this context that we make six urgent recommendations for policy changes in the Autumn Budget, including to avoid stalling the nascent battery storage and ‘smart homes’ sector:
• All rooftop solar cells and panels, as well as energy storage should be classed as ‘excepted plant and machinery’ under Class 1 Business Rates in the regulations (SI2000/58)
• Solar panels and energy storage should be added to the eligibility list for Enhanced Capital Allowances
• We ask HMT to helpfully clarify that Power Purchase Agreement (PPA)-contracted solar is exempt from the Climate Change Levy (CCL)
• Government should establish a subsidy-free CfD auction mechanism for mature low carbon technologies, including large scale solar as soon as possible
• All domestic battery storage installations should qualify for a reduced VAT rate of 5%, as long as it was clear that the storage system was being installed as an ancillary service to a PV panel, even if the PV panel is an existing system
• The export tariff for domestic solar must be maintained, as this is a fair market payment for surplus power that does not add to consumer bills and underpins innovation in the nascent smart home market

Read the full submission