Blog Post

Energy Suppliers call for government to scrap VAT on Green Products and to introduce a Fair Heat Deal

Richard Simmonds • June 29, 2021

New research by energy supplier Bulb Energy has shown that many households wanting to make their homes greener and change their lifestyle to be more echo friendly are being put off by the high cost of low-carbon technology.

High costs to go Green

Environmental groups claim that the use of heat pumps, electric cars and extra insultation for homes are just some of the major ways people can become more environmentally friendly and help achieve the governments target of NetZero by 2050.

According to Bulb’s data the number of online searches for ‘where to buy insulation’, ‘how much are heat pumps’ and ‘how much are electric cars’ show that interest amongst consumers has increased in green measures has grown strongly over the last year.

However, that interest has not translated into actual sales or installations. Bulb says that the fact that sales of solar panels and insulation fell last year means that many people are being put off by the price.

Bulb believes that at least 4 million homes could have been insulated and 2 million tonnes of CO2 cut if customers hadn’t been put off by the high costs of green home products.

Whilst that’s likely the data doesn’t consider the impacts of the Covid-19 pandemic have had on such purchases. Many people have had to tighten their purse strings to ride out the impacts of the crisis and government imposed Covid restrictions have reduced the number of installations allowed to take place.

Also read: Good Energy vs Bulb Energy: Good Energy CEO calls out Bulb’s Renewable Energy Claims

Calls to scrap VAT

There are growing calls from consumer groups, charities, and energy suppliers to scrap VAT on green products to encourage consumers to cut their home’s carbon impact.

Reform to the current incentives offered are also being requested as currently they are not doing enough to encourage greater uptake.

“Families shouldn’t be taxed for choosing green options, so let’s scrap VAT on green products from electric cars and heat pumps to energy efficient fridges and solar panels. This would make green technology more affordable for millions of people, as well as lowering their energy bills and carbon emissions,” said Bulb Co-founder Hayden Wood.

Also read: Is ‘Green Energy’ really good for the environment?

A Fair Heat Deal

Energy suppliers and green groups are also calling for the government to introduce a ‘Fair Heat Deal’ that would slash or scrap VAT altogether on green products and introduce grants that make them cheaper. The proposed Fair Heat Deal includes the following:

Offer up-front financial support for households to buy heat pumps. This is essential to make the transition fair, while pump-priming the market to drive costs down. Grants should cover the entire cost of heat pumps for low-income households. For everyone else, grants should be offered at a level which aims to make the upfront costs of installing a heat pump and complementary energy efficiency measures the same as replacing a gas boiler, with subsidies reducing over time as costs fall. Incentives and subsidies can support the roll-out of attractive financial solutions to bring in private capital, or blend public and private capital, to further support households and communities.
Seek to ensure lower running costs for heat pumps compared to gas boilers – for example by removing environmental levies from electricity bills – while protecting the most vulnerable who live in or are at risk of fuel poverty.
Introduce incentives that encourage households to make green heat choices, such as Green Stamp Duty that is lower for buyers of low carbon, energy efficient homes, and zero VAT on green products and renovation works that decarbonise homes.
Set up a Warm Homes Agency to oversee the scaling of existing initiatives and programmes to protect consumers and, through skills and training, help to create thousands of secure, well-paid green jobs across the country, and ensure these opportunities are just as attractive as equivalent roles in gas heating installation and maintenance today.
Ensure that there are impartial energy advice and support services for consumers.

“A Fair Heat Deal will make heat pumps more attractive to householders and help them to switch over to low carbon heating,” said the CEO of the Energy Saving Trust.

Also read: Green Energy Tariffs rise in importance for consumers, cost of energy bills remains top concern

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