Parliamentarians and Industry Leaders Advocate for Expanded VAT Relief on Low Carbon Heating Technologies
A group of cross-party MPs and Peers has called on the UK Government to adopt a technology-neutral approach to home decarbonisation.
In a letter addressed to James Murray MP, Exchequer Secretary to the Treasury, the co-signatories are urging the inclusion of heat batteries as Energy Saving Materials (ESMs) in the forthcoming Autumn Statement. This letter was sent alongside an industry letter on the same issue, with signatories including Centrica New Business & Net Zero, OVO, EON, and Thermal Storage UK.
The current ESM status provides VAT relief to a limited range of low-carbon technologies, primarily heat pumps. While heat pumps are vital in reducing carbon emissions, they may not be suitable for all UK households. It is estimated that 20 percent of the UK’s housing stock, representing over 5.5 million homes, may struggle to accommodate individual heat pumps due to space limitations and may not have access to a suitable local heat network.
Heat batteries offer a viable alternative, operating at temperatures comparable to traditional fossil fuel systems and utilising existing home infrastructure such as pipes and radiators. They provide an effective low-carbon heating solution with running costs comparable to heat pumps. Furthermore, compared to electric boilers, heat batteries are half as expensive to run.
Despite strong support from senior officials in the Department for Energy Security and Net Zero (DESNZ) and other government bodies, heat batteries narrowly missed achieving ESM status in Autumn 2023 due to definitional issues. Since then, ongoing discussions between DESNZ, HM Treasury (HMT), and HM Revenue & Customs (HMRC) have sought to overcome these barriers. However, the scope of ESM relief has yet to be expanded, despite HMRC recognising that heat batteries meet the scheme’s objectives.
The cross-party letter is co-signed by prominent parliamentarians, including Afzal Khan MP, Ben Lake MP, Bob Blackman MP, Lord Storey, Lord Duncan of Springbank, Baroness Whitaker, Baroness Sheehan, Baroness Brown, and Baroness Hayman. The issue has also attracted attention from several newly elected Parliamentarians, who have made representations to the Treasury on behalf of the heat battery industry.
Afzal Khan, Labour MP for Manchester Rusholme, said: “I know first-hand from my constituents in Manchester Rusholme the devastating impacts high energy bills are having on low-income households as thousands are driven into fuel poverty every year and so many people are still wondering how they are going to make ends meet.
“This is why I support proposals to extend ESM status to heat batteries which, under the right policy framework, will save low-income households hundreds of pounds per year and get Britain back on track to meeting our climate targets. I believe this move can help deliver the new Labour Government’s ambitious national Warm Homes Plan and support our commitment to make Britain a clean energy superpower.”
The co-signatories stress that extending ESM status to heat batteries will particularly benefit smaller, low-income households that lack outdoor space, alongside a request that VAT relief for all ESMs is extended until 2030. This is essential for reducing household carbon emissions by providing consumers with a range of viable and cost-effective, low-carbon heating options.
This call from parliamentarians aligns with industry needs. Coordinated by Thermal Storage UK, the industry letter recommending modernisation of the ESM technology list includes well-known names such as Centrica New Business & Net Zero, OVO, and EON, alongside Energy Saving Trust and the Heat Pump Federation. Co-signatories include green technology innovators such as heat battery manufacturer, tepeo.
Tom Pakenham, Commercial Director at Centrica New Business & Net Zero, commented: “Helping the UK reach net zero needs to be simple and affordable for households. Providing VAT relief on a whole range of low carbon technology will give homeowners more choice on the solutions that will help to decarbonise their homes. We look forward to working in collaboration with the Government on this and other initiatives to empower UK households on their journey to net zero.”
Johan du Plessis, CEO of tepeo, said: “The Secretary of State for Energy Security and Net Zero has expressed a commitment to decarbonising millions more households. By widening the list of ESMs to include heat batteries, the government can fulfil this ambition and support households in making sustainable choices that suit their unique needs.”
The co-signatories strongly support the UK government in including heat batteries in the ESM scheme and welcome discussions between the Treasury, industry representatives, and heat battery manufacturers to achieve this. They believe this step is crucial for meeting the UK’s home decarbonisation targets and providing households, particularly those for whom heat pumps are less suitable, with a viable low-carbon heating option.