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Last edited 25 Jan 2021

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Green Deal Consultation

In October 2017, BSRIA opened its Green Deal Consultation on 'Call for evidence on the reform of the Green Deal Framework' launched by the Department for Business, Energy and Industrial Strategy (BEIS).

The Green Deal scheme was officially launched by the government in January 2013, with public funding withdrawn on July 2015. The Green Deal Finance Company’s assets and remaining loan book was purchased in January 2017 by a consortium of City investors.

The request for evidence seeks to understand the reasons behind the low expression of interest in the scheme and to answer specific questions in terms of the assorted components of its mechanism. It does not consist of a “promise” to re-introduce or indeed support the Green Deal framework as was but opens the dialogue for a framework revision appreciating that some of the aspects might merit additional focus for future policy development.

Background:

The Green Deal was intended to provide up-front investment in the form of loans to consumers who wished to improve or retrofit their homes to achieve higher energy efficiency but lacked financial resources. The novelty offered by the Green Deal mechanism was that the loan was linked to the property rather than the consumer.

Therefore, the loan would transfer to the new owners along with the property if the property was to change ownership. Consumer protection aspects included the introduction of the Green Deal Ombudsman and a certification route for Green Deal providers, assessors and installers.

Important elements within the Green Deal scheme included the 'Golden Rule' and the Pay as You Save (PAYS) concept. The Golden Rule dictated that expected financial savings from implementing measures must be “equal to or greater than the costs attached to the energy bill”. The loan would be paid back through savings achieved in the property’s energy bills (PAYS).

The Energy Performance Certificate (EPC) of properties played an important role in the Green Deal scheme not only by reflecting potential savings (post-measures installation) but also by disclosing the existence of a property’s Green Deal Plan in place to buyers or new tenants. With government plans in place for landlords of private rented properties from 1st April 2018 to achieve a minimum EPC rating of E before signing a new tenancy agreement, the Green Deal could have been used to fund the required energy efficiency improvements.

The idea behind new, innovative financial products supporting the energy efficiency retrofitting of existing homes is not a new one but it has proven hard to implement. Identified barriers and challenges must be carefully reviewed and understood in order to move forward. Most importantly the schemes inherited complexity should be considered against consumer needs and benefits and market appetite. Effective marketing is also crucial for such schemes success.

Tassos Kougionis, Principal Consultant – Residential, at BSRIA’s Sustainable Construction Group, said:

“Critical questions include both technical construction aspects – as in the case of ensuring savings are achieved, verifying quality of measures implemented, monitoring properties performance and protecting the consumer – as well as questions in terms of the financial products themselves – warranties, loan interest rates, life-cycle costing and their adaptability in terms of future technical solution costs and energy prices.

BSRIA recognises the importance of such initiatives and supports their development and improvement. We also foresee the potential development of similar products for new build, as in the case of energy efficiency mortgages. The roll-out of smart meters can also offer a useful tool to assess the performance of such measures implemented.

BSRIA remains committed to offering its services to the consumer, industry and government, ensuring that technical construction solutions targeting advanced energy efficiency are appropriate and well informed. With a strong consumer focus we want to ensure that any suggested measures are – not only reviewed against energy efficiency targets present – but also against health and wellbeing targets, ensuring that residents are provided with the right environment to live in and flourish.”