The Government has embraced the benefits of solar and battery technology with a broadly positive Budget, despite cuts and frustrations.
More funding for upgrades on social housing, changes to the Contracts for Difference system and reform of legacy subsidies are the headline items for the sectors.[1]
Home upgrades
'From this point, our Labour government priority is first and foremost cheaper energy, with clean power key to achieving this,' Chancellor John Healey MP told the House of Commons.
Solar Energy UK is delighted to see that there will be an immediate extra £100m for solar and battery installations on social housing, ensuring that the technologies make the most difference to fuel poverty. Further information on this will be made available by the Department for Energy Security and Net Zero (DESNZ) shortly.
An additional £335m investment will be delivered under the Warm Homes Plan next year, though the overall scheme is being cut by £1bn as a contribution to defence spending.
'These and many aspects of the Budget are most welcome and it is clear that the Chancellor understands how solar and battery storage is contributing to delivering cheaper power. But what we and our members really needed to see was all levies being struck from electricity bills. Their continuing presence remains a serious roadblock on the road to electrifying the economy and bringing down bills permanently,' said Chris Hewett, Chief Executive of Solar Energy UK.
The announcements come on top of the Warm Homes Loan Scheme, intended for homeowners and landlords, which was announced in advance of the Budget.[2] It will provide zero or low-interest loans for a series of energy upgrades, including solar panels and battery energy storage, while ensuring consumer confidence by ensuring that installers work under the standards body MCS. Through removing upfront costs, we are confident that it will ensure even more homes go solar than ever before.
Another boon has been maintaining the Boiler Upgrade Scheme, which swaps gas boilers for heat pumps. Combining a heat pump, battery storage and solar is the most effective way to cut home energy bills. Responding to lobbying by an alliance including Solar Energy UK, funding of £400m per year will be maintained in line with inflation until 2030 – though this is a reduction on previous commitments.
Great British Energy has also taken a haircut, again partly to pay for defence spending, with funding over the spending review period down £200m to £8.3bn.
Another blow is the loss of the zero VAT rating for energy saving materials, which will raise the cost of the loans scheme that has only just been launched. As of now, consumers pay no VAT on home solar and battery installations, in part due to Solar Energy UK lobbying some years ago. This will rise to 5% from 1 April, raising the upfront cost of cutting bills just when it needs to come down.
'Removing the VAT exemption is inconsistent with the Government’s intention for more people to enjoy the benefits of home solar and battery systems. With domestic electricity bills now zero-rated until July next year, saving energy will be taxed more heavily than consuming it – a perverse incentive. We will be urging the Government to reverse course,' said Hewett.
Solar farms
A further big-ticket item in the Budget is the establishment of the Energy Wealth Fund, part of the National Wealth Fund, which 'will invest in renewable and low-carbon energy infrastructure across the UK, helping to unlock growth and supporting the low-carbon economy,' says DESNZ. It will be given funding of £2bn, with further funding linked to revenues from North Sea oil and gas.
Though we are seeking clarification, the Chancellor’s statement today indicates that the forthcoming eighth round of the Contracts for Difference (CfD) scheme will be open only to projects that can connect to the grid and start generating at the earliest opportunity. Previous rounds have applied to projects set to commission over a series of years ahead.
With a wealth of solar projects having secured planning consent, this should not pose an immediate impediment to the sector. However, there may be cause for concern over the medium term, as developers may be less confident of securing support for projects set to be delivered later.
The Chancellor has also said that the earliest solar farms, supported by the legacy Renewable Obligation Certificates system, will move to a fixed-price scheme known as Wholesale CfDs. This would help stop consumers being hit by market prices being determined by the most expensive source of power, natural gas.
Motivation to join the scheme would be provided by an exemption from the Energy Generator Levy windfall tax, which has been extended past 2028. A consultation on the proposal opened today.[3]
'The devil will be in the detail of this scheme. While it reflects understandable pressure to lower bills, it could ultimately prove damaging to that objective by harming confidence in investing in cheap, clean, homegrown power,' said Gemma Grimes, Director of Policy and Delivery at Solar Energy UK.
The plan echoes a voluntary offer made by Solar Energy UK and our largest members in 2022, in response to the Energy Price Crisis.[4]
[1] Budget 2026
[2] Solar & battery storage industry welcomes low-cost loans for home upgrades
[3] Wholesale Contracts for Difference
[2] Solar industry backs plan to cut power bills
Source: SEUK
