0% VAT on Battery Retrofit installs from 2/2024

EricMears

Spies said:

Netexporter said:

Show your workings. Looks a bit of a broad brush statement, to me.

4.8kwh pylontech battery costs £1295, they're rated for 6000 cycles before <80%

That means you have a cost of 21p per cycle, to fill that battery on a cheap tariff, say 9.5p, including losses is 50p, that means each kwh of energy from the battery effectively costs you 14.9p per kwh

You can't just factor in the cost of electric as you can't just use cost of fuel for running costs with a car. 

AIUI,  a 'cycle' is considered to be taking battery SOC from 0% up to 100% and back to 0%.   If you never charge above 95% or let it get below 10% you should be able to do that a lot more than 6000 times.

Also,  if you're filling battery for nothing (some of us are still on deemed export and can assume that) in the Summer and for 7.5ppu (Octopus Intelligent Go) the actual costs of filling battery are rather lower than in that example.

Even if the calculated cost of electricity from battery was 14.9ppu (which I doubt) that's still a nett gain of 15ppu on the normal cost of buying electricity so (very) roughly you'd be saving 50% of the cost of imported electricity (and I a lot more).

Then there's the opportunity cost of being able to earn from grid balancing schemes and the unquantifiable benefits of keeping your lights on when the rest of the neighbourhood can't.

Netexporter

It all depends on your tariff.

Indeed. I was thinking of Agile import and export and discharging twice a day in the summer months. Overnight cheap fill and sell in the highest breakfast slots, then fill with solar and discharge in the most expensive teatime slots. That can all be automated (except the sun!).

Winter overnight fill would obviate the need for buying expensive power in the day. A sunny day might allow for some premium teatime discharge.

I think you have to hammer batteries to make them pay but when you've hammered them into the ground, having got your investment back, there will be even better performing batteries available.

1961Nick

Netexporter said:

It all depends on your tariff.

Indeed. I was thinking of Agile import and export and discharging twice a day in the summer months. Overnight cheap fill and sell in the highest breakfast slots, then fill with solar and discharge in the most expensive teatime slots. That can all be automated (except the sun!).

Winter overnight fill would obviate the need for buying expensive power in the day. A sunny day might allow for some premium teatime discharge.

I think you have to hammer batteries to make them pay but when you've hammered them into the ground, having got your investment back, there will be even better performing batteries available.

This month my batteries receive maximum "hammering" & will turnover 500kWh. With the minimum SOC set at 12%, that works out at 26 cycles ... or 19.2 years at that rate to reach the 6000 cycle benchmark for 70% retained capacity.

It would take a long time to wear out a battery to the point it needed replacing. My advice would be to specify a capacity that will still meet your needs with say 20% degradation in 10 years time. Buying the extra capacity at the start means less cycles & also that all the batteries are always at the same level of degradation - the pack will only operate at the level of the weakest link. 

zeupater

1961Nick said:

So far this year my 19.2kWh battery plant has saved £1043 with 16 days still to go which should add another £50.

(The above figures are calculated from metered readings & round trip losses of 21.6% have been accounted for.)

When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested.

My original US2000 batteries are now 4 years old (around 1250 cycles) & have a SOH of 95.9% which is pretty impressive.

Hi

Re: "When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested." ..... maybe, as long as you're qualified to install yourself or have a pet qualified installer to ensure that guarantees etc remain valid and VAT0 is actually accessible ....

.... however, in the real world currently typical supply & installation margin aspirations would likely add ~50%++ to this figure in which case the ROC above goes completely out of the window ....

Anyway, for typical energy use homes something around 20kWh of storage should likely be considered overkill and for those with any decent PV setup savings of ~£1100 would be severely pushing the boundaries of reality even with the current high electricity rates .... for example, if a typical annual usage home (3300kWh) reduces demand to ~1500kWh/yr through the combination of efficiency measures and adding PV, then the maximum saving potential for a battery would be in the region of £375 (1500*0.25) assuming that there would be absolutely no import at all ... even off peak rates! ... in which case even £375 would look to be extremely ambitious ...

Yes, high users of electricity can achieve better returns, and as long as low overnight rates & decent (re)export offerings are available, so could those that rely (/bet) on the long term existence of such schemes ... however, as ESS, EVs and electric heating become more common, the business need for cheap rate overnight electricity and reliance on distributed storage availability logically declines .... result, well that's simple - regular & dependable cheap rate electricity effectively gets replaced by some form of abundance tariff, but even this would need to be rationed because of demand .... it's very likely that domestic battery systems would then be sized to store some/any spare PV generation and/or cover the daily peak demand/price period in order to reduce the effect of punitive tariffs (the big stick!) ...   

For most, a fully installed system would need to be sub £150/kWh to even start to make sense as any form of investment with a financial return, so apart from atypically high electricity users and/or those seeing such things as a hobby or altruistic nod towards climate change issues it's probably not worth chasing at anywhere near current prices ...

Sorry, but effectively that's reality! ....

HTH - Z

1961Nick

zeupater said:

1961Nick said:

So far this year my 19.2kWh battery plant has saved £1043 with 16 days still to go which should add another £50.

(The above figures are calculated from metered readings & round trip losses of 21.6% have been accounted for.)

When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested.

My original US2000 batteries are now 4 years old (around 1250 cycles) & have a SOH of 95.9% which is pretty impressive.

Hi

Re: "When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested." ..... maybe, as long as you're qualified to install yourself or have a pet qualified installer to ensure that guarantees etc remain valid and VAT0 is actually accessible ....

.... however, in the real world currently typical supply & installation margin aspirations would likely add ~50%++ to this figure in which case the ROC above goes completely out of the window ....

Anyway, for typical energy use homes something around 20kWh of storage should likely be considered overkill and for those with any decent PV setup savings of ~£1100 would be severely pushing the boundaries of reality even with the current high electricity rates .... for example, if a typical annual usage home (3300kWh) reduces demand to ~1500kWh/yr through the combination of efficiency measures and adding PV, then the maximum saving potential for a battery would be in the region of £375 (1500*0.25) assuming that there would be absolutely no import at all ... even off peak rates! ... in which case even £375 would look to be extremely ambitious ...

Yes, high users of electricity can achieve better returns, and as long as low overnight rates & decent (re)export offerings are available, so could those that rely (/bet) on the long term existence of such schemes ... however, as ESS, EVs and electric heating become more common, the business need for cheap rate overnight electricity and reliance on distributed storage availability logically declines .... result, well that's simple - regular & dependable cheap rate electricity effectively gets replaced by some form of abundance tariff, but even this would need to be rationed because of demand .... it's very likely that domestic battery systems would then be sized to store some/any spare PV generation and/or cover the daily peak demand/price period in order to reduce the effect of punitive tariffs (the big stick!) ...   

For most, a fully installed system would need to be sub £150/kWh to even start to make sense as any form of investment with a financial return, so apart from atypically high electricity users and/or those seeing such things as a hobby or altruistic nod towards climate change issues it's probably not worth chasing at anywhere near current prices ...

Sorry, but effectively that's reality! ....

HTH - Z

I can only say what my reality is so I think you must have missed that part where I said "which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested". 

An AC battery install isn't rocket science & any competent electrician could easily do one in half a day. If anyone pays £2500 for that then they really haven't got much interest in money saving! A figure of £500 would be more than adequate including switchgear & a breaker.

You're right when you say that "For most, a fully installed system would need to be sub £150/kWh to even start to make sense...", however, the contributors to this board are far from typical & most are invested in mitigating climate change & saving money at the same time. What's not to like about heating a home during the day with A2A heat pumps running on cheap overnight electricity - an 85% energy reduction & heat costing 1.8p/kWh (1.5p + 20% round trip loss).

I don't see the same risks as you do regarding the cost of overnight electricity. The roll out of ASHPs is so slow that the increased demand on the grid is negligible. The adoption of EVs is following a similar path to the installation of new wind capacity so the status quo is being maintained for now. If anything, the gap between peak rate & off peak electricity looks as if it has a greater chance of increasing rather than converging.

QrizB

1961Nick said:

An AC battery install isn't rocket science & any competent electrician could easily do one in half a day. If anyone pays £2500 for that then they really haven't got much interest in money saving! A figure of £500 would be more than adequate including switchgear & a breaker.

I agree (you might recall I self-installed mine) but, if this zero-rating is like others, BESS components will still be charged VAT when sold by wholesalers and retailers.

It's only when supplied and installed by a VAT-registered organisation that you'll get 0% VAT on the invoice. The installer then claims back the VAT paid on the components.

1961Nick

QrizB said:

1961Nick said:

An AC battery install isn't rocket science & any competent electrician could easily do one in half a day. If anyone pays £2500 for that then they really haven't got much interest in money saving! A figure of £500 would be more than adequate including switchgear & a breaker.

I agree (you might recall I self-installed mine) but, if this zero-rating is like others, BESS components will still be charged VAT when sold by wholesalers and retailers.

It's only when supplied and installed by a VAT-registered organisation that you'll get 0% VAT on the invoice. The installer then claims back the VAT paid on the components.

My battery installation was done by an electrician who also changed a failed solar inverter at the same time. The cost of labour, switchgear & materials was £450 + vat. The job took 4 hours including the solar inverter swap, DNO paperwork & building regs compliance certificate for the new circuit.

zeupater

1961Nick said:

zeupater said:

1961Nick said:

So far this year my 19.2kWh battery plant has saved £1043 with 16 days still to go which should add another £50.

(The above figures are calculated from metered readings & round trip losses of 21.6% have been accounted for.)

When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested.

My original US2000 batteries are now 4 years old (around 1250 cycles) & have a SOH of 95.9% which is pretty impressive.

Hi

Re: "When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested." ..... maybe, as long as you're qualified to install yourself or have a pet qualified installer to ensure that guarantees etc remain valid and VAT0 is actually accessible ....

.... however, in the real world currently typical supply & installation margin aspirations would likely add ~50%++ to this figure in which case the ROC above goes completely out of the window ....

Anyway, for typical energy use homes something around 20kWh of storage should likely be considered overkill and for those with any decent PV setup savings of ~£1100 would be severely pushing the boundaries of reality even with the current high electricity rates .... for example, if a typical annual usage home (3300kWh) reduces demand to ~1500kWh/yr through the combination of efficiency measures and adding PV, then the maximum saving potential for a battery would be in the region of £375 (1500*0.25) assuming that there would be absolutely no import at all ... even off peak rates! ... in which case even £375 would look to be extremely ambitious ...

Yes, high users of electricity can achieve better returns, and as long as low overnight rates & decent (re)export offerings are available, so could those that rely (/bet) on the long term existence of such schemes ... however, as ESS, EVs and electric heating become more common, the business need for cheap rate overnight electricity and reliance on distributed storage availability logically declines .... result, well that's simple - regular & dependable cheap rate electricity effectively gets replaced by some form of abundance tariff, but even this would need to be rationed because of demand .... it's very likely that domestic battery systems would then be sized to store some/any spare PV generation and/or cover the daily peak demand/price period in order to reduce the effect of punitive tariffs (the big stick!) ...   

For most, a fully installed system would need to be sub £150/kWh to even start to make sense as any form of investment with a financial return, so apart from atypically high electricity users and/or those seeing such things as a hobby or altruistic nod towards climate change issues it's probably not worth chasing at anywhere near current prices ...

Sorry, but effectively that's reality! ....

HTH - Z

I can only say what my reality is so I think you must have missed that part where I said "which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested". 

An AC battery install isn't rocket science & any competent electrician could easily do one in half a day. If anyone pays £2500 for that then they really haven't got much interest in money saving! A figure of £500 would be more than adequate including switchgear & a breaker.

You're right when you say that "For most, a fully installed system would need to be sub £150/kWh to even start to make sense...", however, the contributors to this board are far from typical & most are invested in mitigating climate change & saving money at the same time. What's not to like about heating a home during the day with A2A heat pumps running on cheap overnight electricity - an 85% energy reduction & heat costing 1.8p/kWh (1.5p + 20% round trip loss).

I don't see the same risks as you do regarding the cost of overnight electricity. The roll out of ASHPs is so slow that the increased demand on the grid is negligible. The adoption of EVs is following a similar path to the installation of new wind capacity so the status quo is being maintained for now. If anything, the gap between peak rate & off peak electricity looks as if it has a greater chance of increasing rather than converging.

Hi

Actually, I saw what was written & missed nothing and I'm pretty sure that the nuances were covered, hence the caveats included in the referenced post ... high energy usage makes a considerable difference which needs to be highlighted so as not to potentially mislead anyone interested in battery systems, as does the ability to self install or utilise electricians that may not have attended the appropriate training courses to access the full extent of manufacturer guarantees etc (many manufacturers mandate this) .... even queried the ability for the majority to access zero rated VAT on self installations ....

As for the capacity/demand mismatch between day & night creating conditions where electricity is discounted overnight through beneficial tariffs, well it's a logical fallacy to claim that it'll remain so in the long run ... it's just a case of what is considered to be the transition period for all of the appropriate technologies .... of course, first on the horizon is the uptake of EVs which are pretty much now over the tipping point of mainstream acceptance with the current 20:80 mix expected to reverse to 80:20 by the end of the decade, if not sooner .... add in the additional supply side storage & the domestic element being encouraged by government through the VAT reduction as well as the additional overnight heat pump demand and you've likely more than filled the demand shortfall that necessitated the reduced overnight tariffs .... it's not that it might happen, it will happen - the only question is the timescale - but then again, aren't calculated returns for long term returns just that - long term - so at least expect an overlap .... 

Moving on to the position that increasing demand tracking wind capacity ... "well that's not much good when the installed ESS capacity is sized to a daily charge regime on cheap rate and the lack of supply doesn't meet the increased demand " ... so what are we expecting, 2 day ESS autonomy? .. or 3 ... or 4 .... starting to become expensive ... as is the mitigation through restricting EV charging as it's more socially acceptable to not charge the car and have a day off work as well as paying more for overnight electricity than rationing everyone's heating ... isn't it ??? ... so it's pretty logical to predict that cheap rate electricity will only exist when supply conditions dictate, which was covered by "regular & dependable cheap rate electricity effectively gets replaced by some form of abundance tariff" - effectively, winds blowing tonight, fill your batteries whilst you can ... at an appropriately sized administration consideration to a management body though! 

It's not that it might happen, it will happen ... and it's likely to happen well within the expected lifespan of many currently available ESS offerings, so it's just a case of being aware when modelling financial justifications with an expectation that they'll be anywhere near accurate/correct ... pretty much a reasonable set of expectations to be aware of in my books! ...

HTH - Z

1961Nick

zeupater said:

1961Nick said:

zeupater said:

1961Nick said:

So far this year my 19.2kWh battery plant has saved £1043 with 16 days still to go which should add another £50.

(The above figures are calculated from metered readings & round trip losses of 21.6% have been accounted for.)

When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested.

My original US2000 batteries are now 4 years old (around 1250 cycles) & have a SOH of 95.9% which is pretty impressive.

Hi

Re: "When vat is reduced to zero, it should be possible to install 4 x US5000 batteries & an AC inverter for around £5000 which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested." ..... maybe, as long as you're qualified to install yourself or have a pet qualified installer to ensure that guarantees etc remain valid and VAT0 is actually accessible ....

.... however, in the real world currently typical supply & installation margin aspirations would likely add ~50%++ to this figure in which case the ROC above goes completely out of the window ....

Anyway, for typical energy use homes something around 20kWh of storage should likely be considered overkill and for those with any decent PV setup savings of ~£1100 would be severely pushing the boundaries of reality even with the current high electricity rates .... for example, if a typical annual usage home (3300kWh) reduces demand to ~1500kWh/yr through the combination of efficiency measures and adding PV, then the maximum saving potential for a battery would be in the region of £375 (1500*0.25) assuming that there would be absolutely no import at all ... even off peak rates! ... in which case even £375 would look to be extremely ambitious ...

Yes, high users of electricity can achieve better returns, and as long as low overnight rates & decent (re)export offerings are available, so could those that rely (/bet) on the long term existence of such schemes ... however, as ESS, EVs and electric heating become more common, the business need for cheap rate overnight electricity and reliance on distributed storage availability logically declines .... result, well that's simple - regular & dependable cheap rate electricity effectively gets replaced by some form of abundance tariff, but even this would need to be rationed because of demand .... it's very likely that domestic battery systems would then be sized to store some/any spare PV generation and/or cover the daily peak demand/price period in order to reduce the effect of punitive tariffs (the big stick!) ...   

For most, a fully installed system would need to be sub £150/kWh to even start to make sense as any form of investment with a financial return, so apart from atypically high electricity users and/or those seeing such things as a hobby or altruistic nod towards climate change issues it's probably not worth chasing at anywhere near current prices ...

Sorry, but effectively that's reality! ....

HTH - Z

I can only say what my reality is so I think you must have missed that part where I said "which would be a 5 year ROC for me - or around 7 years if you factor in the opportunity cost of interest on £5000 invested". 

An AC battery install isn't rocket science & any competent electrician could easily do one in half a day. If anyone pays £2500 for that then they really haven't got much interest in money saving! A figure of £500 would be more than adequate including switchgear & a breaker.

You're right when you say that "For most, a fully installed system would need to be sub £150/kWh to even start to make sense...", however, the contributors to this board are far from typical & most are invested in mitigating climate change & saving money at the same time. What's not to like about heating a home during the day with A2A heat pumps running on cheap overnight electricity - an 85% energy reduction & heat costing 1.8p/kWh (1.5p + 20% round trip loss).

I don't see the same risks as you do regarding the cost of overnight electricity. The roll out of ASHPs is so slow that the increased demand on the grid is negligible. The adoption of EVs is following a similar path to the installation of new wind capacity so the status quo is being maintained for now. If anything, the gap between peak rate & off peak electricity looks as if it has a greater chance of increasing rather than converging.

Hi

Actually, I saw what was written & missed nothing and I'm pretty sure that the nuances were covered, hence the caveats included in the referenced post ... high energy usage makes a considerable difference which needs to be highlighted so as not to potentially mislead anyone interested in battery systems, as does the ability to self install or utilise electricians that may not have attended the appropriate training courses to access the full extent of manufacturer guarantees etc (many manufacturers mandate this) .... even queried the ability for the majority to access zero rated VAT on self installations ....

As for the capacity/demand mismatch between day & night creating conditions where electricity is discounted overnight through beneficial tariffs, well it's a logical fallacy to claim that it'll remain so in the long run ... it's just a case of what is considered to be the transition period for all of the appropriate technologies .... of course, first on the horizon is the uptake of EVs which are pretty much now over the tipping point of mainstream acceptance with the current 20:80 mix expected to reverse to 80:20 by the end of the decade, if not sooner .... add in the additional supply side storage & the domestic element being encouraged by government through the VAT reduction as well as the additional overnight heat pump demand and you've likely more than filled the demand shortfall that necessitated the reduced overnight tariffs .... it's not that it might happen, it will happen - the only question is the timescale - but then again, aren't calculated returns for long term returns just that - long term - so at least expect an overlap .... 

Moving on to the position that increasing demand tracking wind capacity ... "well that's not much good when the installed ESS capacity is sized to a daily charge regime on cheap rate and the lack of supply doesn't meet the increased demand " ... so what are we expecting, 2 day ESS autonomy? .. or 3 ... or 4 .... starting to become expensive ... as is the mitigation through restricting EV charging as it's more socially acceptable to not charge the car and have a day off work as well as paying more for overnight electricity than rationing everyone's heating ... isn't it ??? ... so it's pretty logical to predict that cheap rate electricity will only exist when supply conditions dictate, which was covered by "regular & dependable cheap rate electricity effectively gets replaced by some form of abundance tariff" - effectively, winds blowing tonight, fill your batteries whilst you can ... at an appropriately sized administration consideration to a management body though! 

It's not that it might happen, it will happen ... and it's likely to happen well within the expected lifespan of many currently available ESS offerings, so it's just a case of being aware when modelling financial justifications with an expectation that they'll be anywhere near accurate/correct ... pretty much a reasonable set of expectations to be aware of in my books! ...

HTH - Z

On the other hand you could be completely wrong - EV sales could stall, HP take up may never get off the ground & the Reform Party could form a government in 2028/29. In the meantime, that's another 6 years on top of the already banked 4 years to get a return on my batteries ~ just under 50% of the way there at present and forecast to break even in 3 more years if peak/off peak differentials remain as they are. By the time you get your battery pack for £150/kWh, I'll already be banking profits on mine.

FYI, the electrician that installed the batteries is an NICEIC approved contractor & also a MCS certified installer. I guess even you would agree that's enough to install a battery?

As for misleading people, I'd be interested to know if there's anyone else other than you that thinks my contributions have been misleading?

Grandad2b

Well, this is timely I'd just been thinking that with conversion losses etc the best case is a saving of around 10p per unit at current prices [I am simply considering a battery as a means to time-shift my PV generation]. Is that going to be worthwhile without a TOU tariff and exporting the excess?
Over the last year my highest daily usage is <11kWh, daily average >6kWh.
Assuming I'm able to empty it overnight (unlikely given my daily average use) a 5kWh battery might at best gain me 90p/day during the generating season; but the reality is that the average from May to July would have been about 48p/day. Try as I might I can't see how to justify a battery on that basis