Good news for SHEAP district heating as commitment secured to continue rebated fuel access

Orkney and Shetland MP, Alistair Carmichael, has welcomed news that the government will U-turn to allow organisations like Shetland Heat Energy & Power (SHEAP) to make use of tax-rebated fuel following representations to ministers.

In April 2022, the Government removed entitlement to use rebated fuels in most sectors except agriculture, rail, and non-commercial heating. Organisations such as SHEAP, that generate electricity and heat primarily for supply to non-commercial premises, but also supply a small number of commercial purposes, were therefore no longer eligible to use rebated fuel. While SHEAP primarily generates heat through burning un-recyclable waste, backup fuel is also required to maintain supply.

Following representations by Mr Carmichael, the government has announced that it will re-extend entitlement to use rebated fuels to machines used primarily (at least 75% of output) to provide heat and electricity for non-commercial premises.

Mr Carmichael said:

“Denying access to rebated fuel for an organisation like SHEAP made no sense at the time or since so I am delighted that the government has changed course.

“Piling on extra tax was an unfortunate oversight by HMRC and counterproductive at best – it would have been a real risk to SHEAP’s business model over time. That there are very few operations quite like SHEAP around the country cannot be an excuse for poorly thought-out rule changes.

“Even so, credit must go when it is due and I am glad that ministers finally listened to our representations on this matter. SHEAP plays a key role in providing energy to homes in Lerwick at a fair price – if they were not doing what they do then levels of fuel poverty would be even higher in the isles than they already are. We need to see the government go further to back district heating, cut bills and reduce fuel poverty in the isles.”

Derek Leask, Executive Director at SHEAP said:

“SHEAP already supplies the cheapest networked energy in Lerwick with the lowest emissions. However our fuel boilers are essential for the limited times our main energy source is out of operation due to shutdowns. Removing the rebated fuel duty would have added cost which ultimately would have been borne by our customers.

“We are grateful to Alistair for his helpful intervention and representation on our behalf. We also appreciate the response from HMRC which recognises heat networks such as SHEAP as instrumental in the transition to heating homes in the UK.”