From Department of Finance; Department of the Environment, Climate and Communications
The government has today (Wednesday, 5 April) approved a report stage amendment brought forward by Minister for Finance Michael McGrath to Finance Bill 2023. The Bill gives legislative effect to the taxation measures recently announced by the government, the purpose of which is to continue to assist families and businesses deal with high energy prices and cost of living challenges.
An additional measure in relation to solar panels has now been agreed. This measure is possible due to amendments made to Annex III of the VAT Directive in 2022, which added a number of new categories to which Member States can apply a zero or reduced rate of VAT. One such option is to apply a zero rate within category 10c which is for the ‘Supply and installation of solar panels on and adjacent to public and other buildings used for activities in the public interest, housing and private dwellings’.
The Department of the Environment, Climate and Communications has estimated that if a zero rate of VAT was passed on to consumers, it would reduce the average cost of the supply and installation solar panels for consumers from €9,000 to €8,000 and would thus help support households reducing their electricity bills. At €0.32c per KWh, this will reduce the payback period for installation from 7 to 6.2 years.
This is a permanent change and Minister McGrath secured government agreement that it will come into effect from 1 May 2023. Minister McGrath will bring forward a Financial Resolution and an amendment at Report Stage of Finance Bill 2023 to give effect to the proposal.
The Department of Finance has estimated that the measure will cost €19 million annually.
Speaking after the government meeting, Minister for Finance Michael McGrath stated:
“The government has agreed to reduce the VAT rate on the supply and installation of solar panels to zero for private dwellings from 1 May 2023. This will result in a significant reduction in the installation cost for households and I believe will encourage more people to avail of this innovative technology.
“This measure underlines the government’s commitment to help households to save money on their energy bills and reduce their carbon footprint and contribute positively to our national climate change targets. I have received approval for the measure to come in to effect from the start of next month to prevent any dislocation in supply ahead of its introduction.”
Minister for the Environment, Climate and Communications Eamon Ryan said:
“This move by Government is yet another step on Ireland’s journey to cleaner, cheaper, renewable energy. We have removed planning permission requirements to install solar panels on residential homes. Our Micro-generation Support Scheme is continuing to prove very successful, following record levels of installations supported in 2022 via the Domestic Solar PV Scheme – operated by the Sustainable Energy Authority of Ireland. With thousands of householders also signing up to sell their excess renewable electricity back to the grid; there is now an even greater opportunity for citizens to be part of the energy transition and become active energy consumers, whilst also supporting the electricity grid and strengthening Ireland’s energy security.
“While this move will help consumers, it will also help the environment. Currently over 50,000 homes have solar panels, with 17,000 solar installations connecting to the grid taking place just last year. This is expected to increase further as prices come down and solar becomes more mainstream.”