Last edited 06 Jan 2015

Green deal


[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 is funded by long-term savings on electricity bills. The green deal launched in autumn 2012, but financing did not become available until January 2013.

Under the scheme, a 'green deal provider' finances the up-front costs, and the consumer's energy supplier adds a 'green deal charge' to the consumer’s bill. The 'golden rule' is that this green deal payment is less than (or at least no more than) the savings in the consumers bill resulting from the energy efficient measures that have been 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 is ‘attached’ to the meter, so if the property is sold, the purchaser takes on the charge. The deal remains with the meter even if the energy supplier changes. This means that a person considering purchasing a property must be informed about the green deal and what it means. The purchaser should then confirm that they agree to be liable for the green deal payments. It is proposed that the green deal will be disclosed to purchasers using Energy Performance Certificates (EPCs). If a purchaser is not informed, the Secretary of State can order cancellation of the green deal and require the person who failed to disclose the deal and secure an acknowledgment, to pay compensation.

To obtain energy efficiency measures through the green deal, consumers must first arrange for an assessment by an accredited green deal assessor (this might be arranged by a green deal provider). They will carry out an assessment of the property and the way it is used, then propose a package of energy efficiency measures for the property and predict the likely energy savings that will result. A green deal provider will then offer a green deal plan to the consumer, outlining the energy efficient measures that they will finance and the resulting green deal payment that will be added to their future energy bills. If the consumer agrees, an accredited installer will implement the measures. The consumers energy supplier will then add a green deal charge to their energy bill. NB Some consumers will need to seek permission from their landlord or freeholder.

The range of energy efficiency measures that might qualify under the green deal include:

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

There is a limit to the amount that can be invested for domestic properties (£10,000). There is no limit for non-domestic buildings.

[edit] Issues

Some critics have suggested that the calculations underpinning predicted savings are too optimistic. To predict savings, costs have 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 say 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 include:

  • The interest rate that green deal providers will charge for financing (perhaps 6-10%), and whether householders would be better to finance improvements themselves.
  • Concerns about whether the green deal will simply allow expensive energy efficiency measures to be installed on properties that are already fairly efficient, whilst not being taken up on properties where very simple and low-cost measures have 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.'

NB in June 2014, the green deal was supplemented by a Green Deal Home Improvement Fund (GDHIF). The Green Deal Home Improvement Fund provides up to £7,600 for domestic energy customers and is designed to work alongside Green Deal finance although householders will not be required to use Green Deal finance to qualify for the GDHIF. See Green Deal Home Improvement Fund for more information

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