The first scheme of renewable energy grants for Irish homeowners, the Greener Homes Scheme, was launched on Monday 27th March 2006 and will make grant funding available to homeowners looking to install renewable energy heating technology such as solar panels, ground, water and air-source heat pumps, and biomass technology such as wood pellet stoves and boilers. As Jeff Colley reveals, although this represents a welcome indication that the Government is starting to recognise the interest in switching to renewable energy in Ireland, will the scheme help or hinder the development of a strong renewable energy sector in Ireland?

At long last Irish homeowners interested in reducing their heating bills, and protecting the value of their homes as both energy prices rise and energy ratings for buildings come ever closer, have some support from the Irish government. However, there is a long held view in the renewable energy industry that although fiscal mechanisms are to be welcomed, perhaps simply introducing grants is not the best approach.

Certainly in the aftermath of the grants announcement, there was a widely reported and discussed belief that, after stalling for many years, the Government had rushed through a decision to announce the introduction of grants in December’s budget, in order to address many Irish people’s fears of exposure to rising energy costs. Conspiracy theorists were even going so far as to point out the coincidence of the detailed announcement of the grants on Sunday March 26th—the day after the Green Party’s annual conference when it was announced that the party’s popularity approval had risen from 5 to 7%. It had been suggested to the industry that an announcement would be made on March 27th at the earliest. This is a minor point perhaps, but potentially indicative that the Government wanted to compete for Monday’s column inches to limit damage and demonstrate their own green credentials. However, was the announcement of grants merely a knee-jerk reaction to growing public interest, or the result of a well thought-out process revealing full consideration of what fiscal measures would help to develop the uptake of renewable energy technologies?

In an article in Construct Ireland published in 2005, the argument against introducing grants was explained. Speaking at the time, Paul Sikora of Cork based heat pump company Dunstar pointed out that grant schemes can both cause prices to raise and engender a cowboy factor, stating “That’s an argument against any and all grants”, whilst Peter Keavney, Manager of Galway City Energy Agency stated his preference for VAT reduction. “It only takes a small intervention to actually get an indirect grant aid or support, and I think that it should come though the VAT route”, Keavney stated. “We’re not asking to get rid of VAT altogether, we’re saying to take 20% of it off and leave it at 1% so it can be adjusted again accordingly.”

Certainly, Construct Ireland can vouch for the fact that in regular discussions with stakeholders in the renewable energy sector, other fiscal measures such as VAT reduction are generally viewed as more conducive to the long-term development of the renewable energy sector. An interesting example exists in the UK Government’s Enhanced Capital Allowance Scheme, which enables businesses to claim 100% first year capital allowances on investments in energy saving technologies and products. Businesses in the UK are now able to write off the whole cost of their investment against their taxable profits of the period during which they make the investment.