In a further blow to the UK solar PV panel installation industry, HM Revenue And Customs confirmed on 9th December in a consultation document that VAT on solar panel installations is likely to be raised on 1st August 2016 from the current level of 5% to the maximum 20% rate. Whilst the consultation runs until 3rd February 2016 there seems little prospect of the UK avoiding being forced by the EU to raise the VAT rate to 20%.
This move is likely to add around £900 to the cost paid by home-owners for a typical domestic 4kWp solar installation and comes after the EU announced earlier in the month that the Minimum Import Price (MIP) on Chinese manufactured solar prices, introduced in 2013 to protect German solar panel manufacturers, will be extended into 2017. This protection for German industry keeps UK panel prices artificially high compared with those outside Europe.
These two moves appear to have caught Amber Rudd, the heavily criticised Secretary of State for the Department of Energy and Climate Change (DECC), by surprise. Her department predicted a substantial fall in consumer prices for solar panels during 2016 and in a recent consultation used this as a justification for proposing an 87% cut in solar panel Feed In Tariff (FIT) generation rates. With many of DECC’s key assumptions now in tatters the industry awaits Amber Rudd’s report on the consultation. This delayed report is expected before the end of 2015, although Amber Rudd was not explicit about publication when she told the Parliamentary Energy and Climate Change Committee on the 16th December 2015 that an announcement would be made in 2015.