A coalition of cross-party MPs and Peers has called on the UK Government to adopt a technology-neutral strategy for home decarbonisation.
In a letter to James Murray MP, Exchequer Secretary to the Treasury, the co-signatories have advocated for the inclusion of heat batteries as Energy Saving Materials (ESMs) in the upcoming Autumn Statement. This letter was accompanied by a similar industry letter, signed by key figures from Centrica New Business & Net Zero, OVO, EON, and Thermal Storage UK.
Currently, ESM status grants VAT relief to a narrow selection of low-carbon technologies, primarily heat pumps. While heat pumps are essential in cutting carbon emissions, they may not be suitable for every UK household. An estimated 20 percent of the UK’s housing stock, equating to over 5.5 million homes, may find it challenging to install individual heat pumps due to space constraints and may not have access to an appropriate local heat network.
Heat batteries present a viable alternative, functioning at temperatures similar to traditional fossil fuel systems and using existing home infrastructure such as pipes and radiators. They offer an efficient low-carbon heating solution with running costs comparable to those of heat pumps. Additionally, when compared to electric boilers, heat batteries are half as costly to run.
Despite significant backing from senior officials at the Department for Energy Security and Net Zero (DESNZ) and other government departments, heat batteries narrowly missed achieving ESM status in Autumn 2023 due to definitional challenges. Since then, ongoing discussions between DESNZ, HM Treasury (HMT), and HM Revenue & Customs (HMRC) have aimed to resolve these issues. However, the scope of ESM relief has yet to be broadened, despite HMRC acknowledging that heat batteries align with the scheme’s objectives.
The cross-party letter is co-signed by leading 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 matter has also drawn interest from several newly elected Parliamentarians, who have made representations to the Treasury on behalf of the heat battery sector.
Afzal Khan, Labour MP for Manchester Rusholme, stated: “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 emphasise that extending ESM status to heat batteries will particularly benefit smaller, low-income households that lack outdoor space. They have also called for VAT relief on all ESMs to be extended until 2030. This is vital for lowering household carbon emissions by offering consumers a range of affordable and effective low-carbon heating options.
The parliamentarians’ appeal reflects the needs of the industry. Coordinated by Thermal Storage UK, the industry letter calling for an update to the ESM technology list includes major players such as Centrica New Business & Net Zero, OVO, and EON, alongside Energy Saving Trust and the Heat Pump Federation. Co-signatories also include green technology innovators such as heat battery manufacturer, tepeo.
Tom Pakenham, Commercial Director of Centrica New Business & Net Zero, remarked: “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, added: “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 urge the UK government to include heat batteries in the ESM scheme and welcome any discussions between the Treasury, industry stakeholders, and heat battery manufacturers to achieve this. They believe this action is critical for reaching the UK’s home decarbonisation goals and providing households, especially those for whom heat pumps are less suitable, with a low-carbon heating alternative.
