The Green Deal is expected to be launched in the next few days. Momentum has been picking up since we heard in August that the Green Deal Finance Company will be loaned £7m by DECC, the Green Deal registry was opening and that guidance had been issued on how to become a holder of the Green Deal Quality Mark.
The Green Deal
Enabled by the Energy Act 2011, the Green Deal provides a finance mechanism by which consumers can improve the energy efficiency of their homes. The proposal is for private firms to offer low interest finance to individuals to be used to pay for energy improvements in their homes. The loans will then be paid back in instalments, softening the blow from having to pay for these improvements in one go.
The government is proposing for loan interest rates to start at 7.5% which is less competitive than other loans out there at the moment. Further, not all homes or energy saving measures attract finance but the Government proposes to be flexible and add to the list off measures annually.
Measures need to abide by the golden rule – unless the energy savings are equivalent to the cost repaying the improvement, the measure will not qualify for finance.
Interestingly the obligation to repay this loan falls on the person who pays the energy bill – and therefore the Green Finance repayment obligation will attach to the owner or tenant of the improved property, including when the property is empty. For now repayment will attach to the electricity bill unless the same supplier also provides gas.
Fortunately the Energy Act makes provision for disclosure of the Green Energy finance to be made to buyers and prospective tenants. Still, I think there has to be a very strong case for energy saving, especially in the early days of the deal, to prove to someone that it is worth taking on a property with finance repayments attached to their ever growing fuel bills.
The Green Deal Registry
Registration is open from 1 October 2012 but not anyone can be a green deal provider (lends you the money), assessor (advises you on what is needed and whether your property and measure qualifies) or installer (carries out the improvement). Earlier this year DECC provided £1m for training for Green deal advisors but many private training firms are currently very active.
Individuals and companies are subject to strict qualifying criteria. Providers need to be authorised by the Green Deal Oversight and Registration Body and, save exceptions, hold a valid Consumer Credit Act 1972 license. The Secretary of State assesses whether the applicant is fit to act in the Green Deal market and the provider needs to disclose amongst other things, whether it will work with a tied Green Deal assessor, either through employment or commission payments.
Given that assessors advise on whether an improvement qualifies or not, a degree of objectivity is required but this may be a tall order where there is a tie with the provider.
Installers need to be certified and registered, with PAS2030 being the new BSI standard for installer sand only certification allows the use of the Green Deal Quality Mark.
The Green Deal Finance Company
The Green Deal Finance Company – a non for profit industry lead consortium – will provide low cost finance to Green Deal providers who can then pass these deals onto consumers taking advantage of Green Deal Improvements. DECC will be loaning £7m to the Bank to kick start its operations. and has provided £12m to 6 cities in order to assist with implementation of the Green Deal.
Critically complicated
The initiative is an excellent one. We all want to reduce carbon emissions from our homes and buildings. However, the system is very complicated. There have been over 10 Green Deal pieces of guidance, codes and regulations passed which are hard to pick up, particularly for smaller companies and individuals. Unfortunately the Government has once again produced a complex web of regulation which is hard to follow by those who are not experts.
In May 2012 and then again in June 2012 Which?wrote a damming article stating that at that stage it would not recommend the Green Deal to consumers. It was not seen as competitive, clear or protected against miss selling. If I was the Government I would have very much liked to have Which? on my side.
Just last week Lord Deben the chairman of the Climate Change Committee wrote a stern letterto the Environment Minister criticising the Government statement “that it sees gas as continuing to play an important role in the energy mix well into and beyond 2030…[not] restricted to providing back up to renewables”. “Unabated gas-fired capacity (i.e. without carbon capture and storage technology (CCS)) in 2030 and beyond” he says “would be incompatible with meeting legislated carbon budgets”.
The statement has disrupted markets and again makes energy investors wonder how long term and sound the Government’s energy policies are. More pressure on the GreenDeal.
The Green Deal has certainly a lot to live up to after being trumpeted as the policy that will ‘revolutionise the energy efficiency of British properties’ (Chris Hume). The Coalition really needs the Green Deal to be a success if they are to have a credible carbon reduction policy. No pressure then and good luck!
If you need further information on the Green Deal please contact Begonia Filgueira on begonia@eric-group.co.uk
