Green Deal launched by UK government

By Ian Youngman - 12 Nov 2010 13:15:0 GMT
Green Deal launched by UK government

Many people would like to install energy saving home improvements such as roof, wall and cavity insulation, more efficient boilers and double-glazing. But those most in need of help to reduce energy bills are those least able to afford to undertake the improvements.

You can go a bank or other lender. But the cost of lending, if you can get any, is very high and may cost more than you save on lower energy consumption over a short period

Estimates vary from £380 to £580 on the amount that the average home could save on energy by being fuel-efficient. With higher fuel prices expected and the increased number of gadgets in the home, not to mention electric cars, the cost of home energy could double or triple within the decade. The cost of upgrading the average home is around £10000. If you move home less than ten years after the work was done, you will probably have paid out more than you save.

The previous government piloted a Warm Homes; Greener Homes strategy. This pay as you save initiative idea was that people who have an eco-upgrade get significantly reduced bills. The really clever idea, which the Coalition government has 'borrowed', is to have the loan attached to the home, not to the homeowners.

The term of the finance is long enough to cover the cost of loft and cavity wall insulation, new boiler or heat pump out of bill savings, through installments that are lower than their energy bill savings.

The Green Deal is the Coalition Government's variation on PAYS to support the implementation of energy efficiency measures to households and businesses without needing to meet any upfront costs. Legislation to introduce the Green Deal is expected before the end of 2010, with a targeted implementation date of Autumn 2012.

The logic is to make energy efficiency affordable and accessible for homeowners, without the risk of spending money upfront for little return if you sell or move. Audrey Gallagher, at Consumer Focus comments, "Green Deal is a total game changer in how householders can make their homes more energy efficient, and it will need careful work to get it right for consumers.

It has the potential to help consumers access a range of measures to stop their houses from leaking heat, without being off-put by high upfront costs. However, to make sure consumers are the winners from the changes, the government must make sure the rules are clear and are written in consumers' favour. There are a lot of potential risks that need to be looked at including getting the finance package for consumers right, robust accreditation and training for installers, and making sure all consumers - particularly those on low incomes - get access to the help they need."

Measures also extend to improving the energy efficiency of the private rented sector. Landlords will face no upfront costs when improving their properties. The forthcoming Energy Bill will create powers allowing any tenant asking for reasonable energy efficiency improvements to receive them from 2015 onwards. It will also allow local authorities to insist that landlords improve the worst performing homes.

David Salusbury of the National Landlords Association comments, "The Green Deal proposals represent a new opportunity for landlords to improve the energy efficiency of their properties, reduce their tenants' utility bills and play their part in tackling climate change. It should provide landlords with an innovative new avenue to invest in their properties, creating warmer, greener houses while simultaneously improving the fabric of the private rented housing stock."

British Gas has just launched British Gas Green Deal, where it will invest £30 million in installing energy efficiency measures in its customers' homes at no up-front cost. Repayments from customers will be made via savings in their energy bill. Phil Bentley of British Gas explains, "With rising energy prices there has never been a better time to improve the energy efficiency of Britain's homes."

The key to Green Deal is a new financing framework to enable the provision of energy efficiency measures to all householders, and some small businesses and landlords. It is funded by a charge on energy bills. A loan from a bank or finance company pays for the work, mainly loft and wall insulation.

But the householder does not pay back the company directly or have any upfront costs. The money is repaid via electric and gas bills, with the energy company passing the money to the lender. It is not a personal loan, so if you move home, the bill/loan is paid by the new occupier/owner, not you.

With electric cars and more devices, the demand for electricity in the home is expected to double in the next few years. As with all initiatives, the number of people actually taking it up will be much less than the government claims. How effective it is will depend very much on the detail in the legislation and how it is implemented.

Before work is done or an energy loan agreed, there will be an independent energy survey of the property, giving clear advice on the best energy efficiency options, such as loft or cavity wall insulation. The reason for the delay in implementing the deal is that work will only be carried out by accredited companies, and money loaned by accredited finance providers. It is likely that national companies will be the main ones for both categories, but how companies are accredited and monitored, has so far been skated over as a minor technicality.

For those who want to go further than passive measures on insulation, you can consider renewable energy such as solar panels, wind turbines and wood-fuelled stoves. As well as saving on energy bills, you can have a feed-in tariff where you not only get paid for the electricity to produce, but you can sell any excess electricity to the national grid.

The soon to be launched Renewable Heat Incentive will pay you for installing renewable heat systems such as solar hot water panels and wood pellet boilers.

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Topics: Wind Energy / Solar Energy / Renewable Energy