Last edited 25 Jul 2015

Green deal

Contents

[edit] Introduction

The Energy Act 2011 included provisions for the 'Green Deal', a Department of Energy and Climate Change (DECC) initiative offering a mechanism for funding energy efficiency improvements. Instead of paying up-front to have energy efficiency measures installed in a property, the cost was funded by long-term savings on electricity bills. The Green Deal was launched in autumn 2012, but financing did not become available until January 2013.

Under the scheme, a 'green deal provider' financed the up-front costs, and the consumer's energy supplier added a 'green deal charge' to the consumer’s bill. The 'golden rule' was that this charge must be less than (or at least no more than) the savings in the consumers bill resulting from the energy efficient measures installed. As a consequence, the consumer’s overall bill should be the same, or lower than it was before the energy efficiency measures were installed.

The Green Deal charge was ‘attached’ to the meter, so if the property was sold, the purchaser took on the charge. The deal remained with the meter even if the energy supplier changed.

To obtain energy efficiency measures through the Green Deal, consumers first arranged for an assessment by an accredited green deal assessor (this might be arranged by a green deal provider). They carried out an assessment of the property and the way it was used, then proposed a package of energy efficiency measures for the property and predicted the likely energy savings that would result. A green deal provider would then offer a green deal plan to the consumer, outlining the energy efficient measures that they would finance and the resulting green deal payment that would be added to their future energy bills. If the consumer agreed, an accredited installer would implement the measures. The consumers energy supplier would then add a green deal charge to their energy bill.

The range of energy efficiency measures that might qualify under the Green Deal included:

The pay-back period for domestic properties could not exceed the length of time the improvements lasted. For non-domestic properties, the pay-back period could be shorter, to allow payback within the lease period. This was because, unlike the domestic sector, energy use may vary significantly between successive users of a non-domestic property.

[edit] Green Deal Home Improvement Fund

In June 2014, the Green Deal was supplemented by a Green Deal Home Improvement Fund (GDHIF). The Green Deal Home Improvement Fund provided up to £7,600 for domestic energy customers and was designed to work alongside Green Deal finance although householders were not required to use Green Deal finance to qualify for the GDHIF. See Green Deal Home Improvement Fund for more information.

[edit] Issues

Some critics suggested that the calculations underpinning predicted savings were too optimistic. To predict savings, costs had to be estimated, and these are dependent not only on the use of the property, but also the long-term price of energy and the details of the specific tariff the consumer signs up to. The Department of Energy and Climate Change itself said that...

….actual cash savings cannot be guaranteed by government since no-one except individuals and businesses themselves can control how much energy they actually consume in their own property.

ref DECC, The Green Deal: A summary of the governments proposals.

Other issues included:

  • The interest rate that green deal providers charged for financing (perhaps 6-10%), and whether householders would be better to finance improvements themselves.
  • Concerns about whether the Green Deal would simply allow expensive energy efficiency measures to be installed on properties that were already fairly efficient, whilst not being taken up on properties where very simple and low-cost measures had yet to be installed.
  • The quality and cost of assessors.
  • The quality of installers.
  • Concerns about the applicability of assessment and retrofitting techniques to some of the UK's 'traditional' building stock (pre 1919), which behave differently in relation to ventilation and moisture than more modern buildings. Ref Responsible Retrofit of Traditional Buildings, the Sustainable Traditional Buildings Alliance.

In September 2014, the Energy and Climate Change Committee published Energy and Climate Change - Third Report The Green Deal: watching brief (part 2). This criticised the Green Deal, proposing that, '... the Government must re-evaluate its approach and set out a clear strategy to revive the failing scheme. Unless the package is made more attractive to a wider group of consumers, Green Deal finance is likely to remain unappealing to many.'

[edit] Cancellation

On 23 July 2015, Climate Change Secretary Amber Rudd announced that there would be no further funding to the Green Deal Finance Company and that the Government would stop any future funding releases of the Green Deal Home Improvement Fund. This was described as a move to protect taxpayers following low take-up and concerns about industry standards. Ref Gov.uk. The announcement did not impact on existing Green Deal Finance Plans or Green Deal Home Improvement Fund applications or vouchers.

Rudd suggested that the Government would work with the building industry and consumer groups on a new value-for-money approach, but that future schemes must provide better value for money, supporting the goal of insulating a million more homes over the next five years and the Government’s commitment to tackle fuel poverty.

See Green Deal scrapped for more information.

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