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Green Deal scheme

Green Deal promo pic'Green Deal With It!' threatens the slogan promoting the finance scheme for home energy improvements, such as a new boiler. Heat wasted from buildings represents 38% of the UK's greenhouse gas emissions according to the government.

NOTE: On 23 July 2015 the government stopped further funding of Green Deal loans, effectively ending the scheme for new applications. See 'Green Deal axed'. The following is for reference only.

For more information phone the Energy Saving Advice Service on 0300 123 1234

The Green Deal is the government's flagship policy for improving the energy efficiency of the nation's housing stock and non-domestic properties. The full scheme was launched on 28 January 2013, and represents a significant new approach for financing energy-saving measures or renewable energy technologies.

Commenting on the launch, Deputy Prime Minister Nick Clegg said: 'The Green Deal will help thousands of homes stay warm for less. Those people will benefit from energy saving improvements - and their energy bills will fall... The Green Deal will support thousands of jobs - not just over the next few years, but in the long term.'

Upfront finance for 'green' measures

Essentially, the scheme provides upfront finance for homeowners and businesses to cover the capital cost of installing any of the 45 or so eligible measures, for example, a new energy-efficient boiler or solar panels. The loan is repaid from the projected saving in energy costs of the property, calculated over the lifetime of the loan, say 20-25 years. It is thus designed to overcome the major obstacle to take-up of such measures, namely the initial cost.

The loans are provided by The Green Deal Finance Company (TGDFC), formed by a coalition of over 50 companies, trade associations and public bodies, GD Quality Mark launchincluding five of the 'big six' energy companies. Repayments are made as a charge on the property's energy bill. In theory the deal should see the householder better off at the end of the loan repayment period than if no measures had been installed, but there is no guarantee of this. It is expected that savings will increase over time as energy prices rise.

 

The Green Deal quality mark was launched in 2011 by Minister of State Greg Barker, with David Thorne, chief executive of Gemserv, and Virginia Graham, chief executive of REAL, some 18 months before the actual scheme went live in January 2013.

How will it work?

Obtaining finance through the Green Deal involves answering the following questions (for more detail see our 'Step-by-step' guide):

1. Is the measure eligible?

One principle of the Green Deal is that any measures attach to the property for the lifetime of the loan, and cannot be moved elsewhere. So, an eligible measure is one that cannot easily be taken by someone when moving home, for example. A full list of qualifying measures is available from DECC; a selection is given below. Note that when a property is sold, the loan transfers to the new owner.

Measures eligible under the Green Deal
Heating, ventilation and air conditioning Condensing boilers, heating controls, underfloor heating, heat recovery systems, mechanical ventilation, flue-gas recovery systems
Building fabric Cavity wall insulation, loft insulation, flat roof insulation, internal wall insulation, external wall insulation, draughtproofing, floor insulation, heating system insulation, energy-efficient glazing and doors
Lighting Light fittings and controls
Water heating

Innovative hot-water systems, water-efficient taps and showers

Microgeneration Ground and air source heat pumps, solar thermal, solar PV, biomass boilers, micro-combined heat and power

2. Is the measure suitable for the property?

Suitable measures are assessed according to the design and age of the property, and their potential rate of payback. A qualified and accredited Green Deal Assessor will survey the property and make recommendations on which measures are potentially suitable and most likely to attract Green Deal finance. For domestic properties this assessment is added to a beefed up Standard Assessment Procedure (SAP), as performed for an Energy Performance Certificate.

3. Does the measure obey the 'Golden Rule'?

Broadly, to qualify for the Green Deal, measures should conform to the so-called 'Golden Rule' - i.e. their initial cost will be repaid from anticipated savings in energy bills over the lifetime of the loan. However, for certain measures, such as solid wall insulation, where the typical payback period of, say, 30 years exceeds normal loan terms (e.g. no more than 25 years), extra initial subsidy can be sought from another scheme called the Energy Companies Obligation (see also Insulation and heating grants). Alternatively, the householder can chip in with some money up front to reduce the size of the loan required, and hence the repayments.

Safeguards

With government estimating that some 14 million homes will retrofit insulation under the Green Deal by 2020, the sums involved are massive, and so adequate safeguards and consumer protection are vital. A Green Deal Code of Practice has been drawn up to ensure the safety, reliability and performance of products, and the quality of installation work. Participants in the Green Deal have to be authorised and monitored by the Green Deal Oversight and Registration Body (GD ORB).

Is it working?

A major concern of commentators is that interest rates on Green Deal loans are too high to make them attractive to householders. The rate was set initially at 6.9%, but some commercial rates are lower than this. However, the repayment terms for Green Deal loans are typically much longer than bank loans, at up to 25 years, and of course the loans attach to the property not the person. A further concern is the impact of a Green Deal loan when it comes to selling your house. Will it put people off? Maybe not if the cost of energy rises steeply as predicted in the next decades.

However, by the end of July 2014 only just over 1800 Green Deal plans had been enacted and measures installed, although over 300,000 homes had received a Green Deal Assessment over the same period.

Green Deal Cashback - NOW CLOSED!

In October 2012 the government annnounced that a range of cashback incentives would be payable to householders who sign up to install measures under the Green Deal from January 2013. This was closed in June 2014, to be replaced by the Green Deal Home Improvement Fund, which proved short-lived. It was axed after just six weeks when the budget ran out.

Energy Companies Obligation (ECO)

This is a mechanism for financing energy efficiency measures for lower-income and vulnerable households. It started in January 2013 to complement the Green Deal, is being funded by the big energy companies, and replaces the previous CERT and CEST obligations. It also subsidizes energy efficiency measures that do not meet the Golden Rule, but are nonetheless important in cutting fuel bills and meeting carbon reduction targets, such as solid wall insulation. Hence, consumers may be offered a financial support package that is part Green Deal loan and part ECO subsidy.

Each major energy supplier will be obliged to earn a certain number of 'ECO' points by providing funding toward Green Deal measures under any of three ECO schemes:

Affordable Warmth - aimed at low-income and vulnerable private households, it replaces the existing Warm Front scheme; will provide heating and energy efficiency measures.

Carbon Saving Obligation - aimed at 'hard-to-treat' properties; will cover solid wall insulation (SWI) and the more difficult cavity wall insulations.

Carbon Saving Communities - intended to focus carbon-saving measures on low-income communities, including rural settlements.