The UK government should make permanent the VAT holiday on energy savings materials, set zero rate VAT on building retrofits which improve energy efficiency, and provide low-cost loans for SMEs to build onsite renewables.
That is the list of recommendations from a new report by thinktank and charity Green Alliance, commissioned by grocer and mutual organisation Co-op, which also called on policymakers to expand the remit of the Business Climate Hub in England to match Business Energy Scotland as well as offer free energy auditing.
Among the other calls to action in the report were for the government to increase the minimum energy efficiency for leased commercial properties to EPC B for new tenancies, increase the accessibility of power purchasing agreements for businesses by creating a credit guarantee scheme and contract template, and reform Renewable Energy Guarantee of Origins (REGOs) which will otherwise “become increasingly irrelevant” for reaching clean power targets.
Green Alliance’s research also sets out practical measures for businesses to consider in their transition to net zero, including increasing energy efficiency by installing a smart meter, as well as investing in onsite renewables which can be paid back in as little as four years.
Essentially, the report shows the importance of small to medium-sized enterprises (SME) to the clean power targets in the UK, and calls on the government to recognise just how crucial they are.
According to the report, a lack of transparency risks locking small businesses out of long-term, and often cheaper, clean energy contracts. As of 2023, more than three million small businesses did not have a smart meter installed.
In a letter to energy secretary Ed Miliband, Co-op CEO & industry co-chair of the Net Zero Council Shirine Khoury-Haq, warned that businesses face “far-reaching” challenges when trying to decarbonise. She says the UK is at a “crucial juncture” on the path to net zero and that supportive policy environment is required.
“The UK has made huge strides in the transition to clean energy and we need to continue work on delivering a cleaner, greener and fairer future,” said Khoury-Haq.
“The opportunity ahead of us is significant and failure to act now will be irreversible in the future. As this important report shows, the role of businesses as energy consumers is a crucial part of the equation in delivering our climate and green growth targets.”
She added: “To deliver a better environment, create new jobs, and support our local community businesses, we must address barriers SMEs face in the clean energy transition.”
Roz Bulleid, research & policy director at Green Alliance, commented: “How we power the UK’s small businesses could make a significant difference to how easy it is to have a clean power system by 2030.
“Our research shows these firms used the equivalent of 85% of the UK’s renewable energy last year, but they often lack the capacity to build their own renewables or make significant energy efficiency investments and are too small to secure long term deals for cheaper clean power. Policymakers can help by improving businesses’ insights into their power use and addressing the cost barriers to them going green, including through free energy audits, low cost loans and making permanent the VAT holiday on energy saving materials.”
[image credit: Co-op]
