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Cut cost of renewable energy investment with new tax incentive

Businesses and commercial landlords in England can now benefit from business rates relief on investment in green energy technologies until 2035.

The policy exempts companies from business rates when investing in 'eligible plant and machinery used in onsite renewable energy generation and storage'. A full list of qualifying technologies is yet to be published, but it is likely to apply to onsite solar panels, wind turbines, battery energy storage and electric heat pumps.

Protection from rising energy prices

With rocketing energy prices, this new tax incentive gives companies another reason to self-generate and store their own renewable energy supply – freeing themselves from high network costs and the uncertainty of extreme market volatility.

There's never been a better time to invest in renewable energy solutions, such as solar and battery storage. Sharp drops in technology costs and higher commodity prices already provide a strong economic case. For example, six months ago we forecasted a £43,000 annual saving for a new solar PV project, which has now risen by a third to £78,000.

Generating and storing your own cheaper solar power can also reduce the cost of installing electric heat pumps or charging points for electric vehicles.

Battery storage advantage

In addition, battery energy storage systems can unlock new flexibility revenues via demand side response, while also providing a green back-up electricity supply to increase energy security.

The sustainability and reputational benefits of displacing expensive grid power with renewables are obvious, but this environmental advantage also bolsters the bottom line. By decarbonising your business and working towards net zero, you can also get ahead of tighter environmental regulations, such as The Taskforce on Climate-Related Financial Disclosures (TCFD), as well as rising carbon taxes.

£170m invested into business rates relief

Green business rates relief has been in place since 1 April 2022 – brought forward by 12 months to spur business growth and ease inflationary pressures. The government has said that its policy to decarbonise buildings will save businesses an extra £35 million in 2022-23, and is expected to be worth around £170m over the next five years.

The British Property Federation has supported the policy, which it says removes the previous penalty of investing in building decarbonisation, whereby rates were increased in line with rising property values. Any added value from installing renewable systems is now excluded from rateable value.

The government has also introduced 100% relief for eligible low-carbon heat networks with their own rates bill, while VAT has been removed on a variety of energy-saving measures for domestic properties.  

130% green tax break

As an added incentive to decarbonise non-domestic buildings, businesses have another 12 months (until end of March 2023) to benefit from the Super-Deduction tax. This was introduced in 2021 to provide a break on plant and machinery. It enables companies paying Corporation Tax to claim 130% capital allowances on most energy equipment, that usually qualify for 18% main rate writing down allowances.

Now is the time to unlock tax incentives and take a fast track to clean energy independence.

View our report on how you can turn the current market volatility into a net zero opportunity