“Tax Reform Needed to Unlock Cheaper Cleaner Heat for Homes”

 

Deputy Shay Brennan has called for a reduction in the VAT rate applied to district heating systems, saying the change would encourage development and make them a more attractive option for housing projects.

 

The Dublin Rathdown Fianna Fáil TD said lower VAT would drive investment in district heating over individual heat pumps, helping reduce household energy bills while supporting Ireland’s climate targets.

 

Currently, district heating construction is subject to VAT at 13.5%, compared to 9% for individual heat pumps, which also benefit from SEAI grants. Deputy Brennan said the imbalance must be addressed to create a level playing field.

 

District heating systems generate heat in a central location and distribute it through insulated pipes as hot water for homes and businesses.

 

Deputy Brennan said:

 

“The VAT rate on district heating needs to be brought in line with individual heat pumps.

 

“The high upfront cost of installing pipe infrastructure is a major barrier for developers and often leads to a preference for individual systems instead.

 

“There is a major opportunity to utilise excess heat from data centres, which is currently going to waste, and turn it into lower energy costs for the public.

 

“By using renewable energy and recovered waste heat, district heating can deliver cheaper bills for residents while helping meet climate targets.

 

“More than 50% of Ireland’s building stock could be suitable for district heating. We should be encouraging a shift from individual heat pumps to more efficient centralised systems.”

 

He highlighted the Tallaght District Heating Scheme, operating since 2023 as Ireland’s first large scale network. It supplies heat to public and residential buildings using waste heat from a nearby Amazon data centre.

 

The scheme is expected to generate 270,000 MWh over 30 years and has already saved 1,098 tonnes of carbon dioxide as of June 2024.

 

Deputy Brennan said the immediate step should be reducing VAT to 9% to match individual heat pumps, with consideration also given to a zero % rate, similar to solar panels.

 

“Currently, the lowest VAT rate applied to district heating in the European Union is 5% in Hungary. District heating systems have the potential to be transformative, providing cleaner and more affordable energy to thousands of homes. We need to be doing everything possible to make them economically viable,” he concluded.