Industry welcomes tax boost for microCHP

CHANCELLOR SUPPORTS NEW HOME ENERGY REVOLUTION

The Chancellor brought a home energy revolution one important step closer in today’s budget (16 March 2005) by reducing VAT on domestic micro combined heat and power (microCHP) appliances from 17.5% to 5%.

The announcement means that microCHP units now benefit from the same VAT rating as some other energy efficient products and the use of energy itself – a move designed to encourage people to invest in this new, economical and environmentally friendly technology.

MicroCHP is set to revolutionise the home energy market by enabling customers to produce part of their own electricity whilst heating their homes. It is estimated that a microCHP would cut a typical household’s energy bills by around £150 a year and carbon dioxide emissions by approximately 1.5 tonnes a year. A quarter of homes installing 1kW microCHP units would make a significant contribution to the UK’s domestic energy efficiency carbon dioxide reduction targets, and provide generation capacity equivalent to almost half that of today’s nuclear power station fleet.

Today’s development marks a further step in the Government’s move towards a low carbon economy. In Spring 2003 the Government’s Energy White Paper identified energy efficiency as the cheapest, cleanest and safest way of meeting the Government’s Kyoto and manifesto targets. Since then, the UK Government has demonstrated international leadership in removing technical and regulatory barriers to distributed generation. Later this year this work will continue with the development of a Microgeneration Strategy, a statutory duty on the Government under section 82 of the Energy Act 2004.

Baroness Maddock, President of the Micropower Council, said: "We are pleased to see the Government has acknowledged the valuable role of consumer-based production of sustainable heat and electricity for the future of this country. This reduction in VAT sends a clear signal to micropower technology developers, customers and investors that the Government recognises the potential of consumer – based power generation in the energy policy mix to meet the country’s Climate Change objectives."

This was endorsed by Roger Webb, Heating Services Director of the Society of British Gas Industries, who stated: "We are delighted that the Chancellor has listened to the views of the industry by offering this excellent incentive to UK households to invest in microCHP technology. In doing so, the Government has demonstrated its commitment to cutting carbon emissions, as outlined in its Energy White Paper. This cut in VAT will help the industry further develop the market for more fuel efficient heating systems, while consumers will benefit in the long term from greater availability of appliances that will cut their heating bills."

David Green, Director of the Combined Heat and Power Association, said: "All CHP schemes need a boost, and welcome as this announcement is today we urge the Government to deliver on the rhetoric of its commitment to CHP and put in place a comprehensive package that will put the UK back on track to deliver its CHP target, despite the adverse market condition the Government has created."

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Notes to Editors:

1. The Micropower Council is a cross-industry body that brings together companies, NGOs, trade associations, professional institutions and other establishments interested in the promotion and development of small scale sustainable heat and electricity production.

2. The SBGI www.sbgi.org.uk represents the whole of the onshore gas industry, ranging from gas suppliers, shippers and transporters, metering, distribution equipment and contracting companies, to controls and appliance manufacturers and service providers. The SBGI’s main aim is to promote a thriving UK gas industry, both at home and abroad, while also continuously striving to develop and adapt the ever changing needs of its members and the industry.The SBGI also has a domestic CHP section, which includes all the organisations within the UK microCHP industry.

3. The Combined Heat and Power Association www.chpa.org.uk works to promote the wider use of combined heat and power and community heating. Clean and efficient Combined Heat and Power (CHP) is already in use on close to 1,400 locations around the UK.