The recent VAT tax changes announced by Chancellor Rishi Sunak stand to slash as much as £1,000 off the upfront bill for solar installation and could result in £300 a year in savings after that. This means UK solar installations like heat pumps and solar panels will be more affordable for homeowners. That is likely to push a greater uptake among the general public which will result in higher demand for solar installers.
Tax reductions
The government has long supported money-saving initiatives to stimulate green energy and solar power in the UK. Now, following the Spring Statement, the 5% VAT imposed on the installation of energy-efficient hardware like solar panels and heat pumps has been removed entirely.
With the average solar panel installation costing a homeowner between £4,000 and £8,000, this reduction is a significant boon to those looking to reduce their energy costs and carbon footprint simultaneously. This benefit comes alongside the pre-existing Smart Export Guarantee, which is a government requirement for energy suppliers to remunerate customers for any electricity that they individually produce and export back to the public energy grid – but only if they use photovoltaic solar panels that generate electricity.
Business opportunities for solar installers
These VAT changes coincide with the soaring cost of things like electricity and gas to create a unique situation for solar panel businesses and the consumers who purchase from them. With the 5% VAT removed, the previously estimated 9-17 years it would take to recoup an investment in solar energy is reduced significantly – and this is before the soaring energy costs are factored in.
Now, with the cost of energy continuing to rise, buying solar panels makes better business sense for a wider range of consumers. This means solar installers will see a surge in business but it also means new installers are likely to appear in order to take advantage of the larger market.
This wave of new business is expected to be highly relevant for both homeowners and for businesses that seek to reduce their operating costs. While the VAT savings will make solar panels more affordable, businesses are also generally larger consumers of electricity which gives them an even greater incentive to install as much solar as possible.
Considerations for solar installers
This expected wave of business for solar installers is a welcomed boost for an important sector of the UK’s economy. However, that doesn’t mean that solar energy is suited to every property in the UK. Solar installers will be best suited to target their advertising and marketing dollars to certain areas and demographics.
Obviously, energy-intensive industries like manufacturing are a good place to start as these businesses have high energy costs and generally operate out of large buildings that can accommodate big solar installations. However, new regulations also mean all new build homes need to be more efficient. That has made solar panels more attractive for developers, architects and engineers. These groups are likely to help fuel future solar growth.
Another potential area of growth is the public sector. As the cost of solar drops, hospitals, schools and other services are more likely to see solar as a long term solution to tight budgets.
With the uncertain economic situation leading to cash flow and income challenges for some homeowners, the up-front cost of solar panel installation may also lend itself to solar installers offering more financing options. The ability to spread payments from an installation will allow a larger section of the public to take advantage of the benefits of solar panels. It also makes solar more attractive to businesses that would otherwise worry about disrupting their cash flow.
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