Green Deal or No Deal: Can the Government’s Flagship Scheme Work?

York Way, Kings Cross - Prime candidates for the Green Deal?

I’ve talked much about the Green Deal in earlier postings and, indeed, it is widely recognised as the flagship environmental policy of this Government, which anticipates that some 14 million houses will have been improved through Green Deal finance by 2020, leveraging £7 billion investment annually and creating 250,000 jobs.

It is currently proposed that a loan of up to £10,000 will be available for each household, but with repayments attached to the energy meter not the householder. Applications will be assessed by competent Green Deal Advisors, based on their ability to meet the “Golden Rule”. This will require that the value of work be recoverable within 25 years or within the predicted lifespan of the products involved, whichever is the least. Finance will be organised through the Green Deal Provider, who would normally be responsible for the installation. Repayments on the other hand will be via the Energy Company and be transferred to a new owner on sale of the property. It is unclear what will happen if properties remain empty for many years after, for example, the death of the householder.

The Energy Company Obligation (ECO) will replace previous subsidies, such as the Carbon Emissions Reduction Target (CERT) and Warm Front, that focus on low-income and vulnerable households, but share a common front-end and process to the Green Deal. Importantly it will also provide funding for measures that do not meet the Golden Rule, but represent the only feasible energy saving measure, such as solid wall insulation.

In a recent briefing note from the UK Green Building Council (UKGBC) to its members a number of questions were raised:

Will the cost of finance be low enough? It is hoped that this will be addressed by the promised involvement of the Green Investment Bank in funding the scheme, at least in the early years.
Will the proposition for consumers be compelling enough? This is yet to be addressed, but seems likely to be left in the hands of the Providers.
Will consumers be properly safeguarded? In a briefing note published in May of this year DECC stated that “The overall requirements for Green Deal Providers and Installers will be brought together in a Green Deal Code of Practice which is being developed by DECC with the assistance of industry experts.” Green_Deal_briefing

A Publicly Available Standard (PAS 2030) is being developed titled ‘Improving the energy efficiency of existing buildings: Specification of installation procedures, process management and service provision’. As the title implies this will be crucial in providing a framework and standard for works commissioned under the Green Deal. PAS_2030

The UKGBC expresses concern that the Government has failed to commit to setting targets for the Green Deal within the 2011 Energy Bill:
“This has led a large coalition of NGOs and businesses, including the UK Green Building Council and many of our members, to ‘Demand a Better Bill’ – a campaign pushing for the Energy Bill to include a commitment to “deliver policies that cut carbon by at least 42% (by 2020) and eliminate fuel poverty (by 2016)” Energy_Bill. This would be achieved through a “Warm Homes Amendment” to the Bill, which would place obligations on the Secretary of State for Energy and Climate Change to publish a plan for achieving energy savings from the UK building stock and report progress in delivering against that plan. At the time of writing, Government amendments have been made to tackle these issues, but these are some way short of those proposed under the campaign.” This Amendment was debated on 7 July, leading to a delay in the implementation of the Bill, and potentially more time to make the necessary amendments.

The Committee on Climate Change 3rd Progress Report on Meeting Carbon Targets published at the end of June stated that “the Green Deal and the new Energy Company Obligation (ECO) should be aligned with the ambition to insulate all lofts and cavity walls by 2015, as well as 2.3 million solid walls by 2022.” It pointed out that the take-up of solid wall insulation (SWI) in particular has been very low, with only 13,000 walls treated in 2010 under CERT, whilst the take-up of Community Energy Saving Programme (CESP), which was intended to drive the installation of SWI, had only 7 schemes approved in 2010. CCC_Report_3

The CCC report considers that the way the Green Deal and ECO are currently configured encourages neither whole-house nor area-based approaches. The CCC’s analysis indicates that the £10,000 limit placed on the Green Deal will preclude a comprehensive approach to carbon reduction. For example the German CO2 Refurbishment Programme offers up to 50,000 euro per property. The area-based approach “...applies the whole-house approach on a street by street basis. It strengthens incentives for uptake of measures, based on evidence that suggests people are likely to be more willing to act when they can see others acting. It also offers scope for cost reduction through scale economies.” This is unlikely to fit with Green Deal Providers such as B&Q and M&S who will most likely deal with individual householders.

The CCC also warns that “ECO funding may be restricted under limits on DECC spending, given that this may be classed as tax and spend, limits for which were set to 2014 in the 2010 Spending Review.”

Clearly there are massive opportunities for those who position themselves correctly to service the Green Deal and ECO. However uncertainties over uptake mean that many companies will hesitate before investing in the staff, training, equipment and premises required. The willingness of Government to dilute Feed-in tariffs and zero carbon has eroded confidence that it will not in future meddle with poorly designed schemes that are found to have unintended consequences. As the Green Deal and ECO schemes evolve in coming months it is critical that industry uses the opportunity to consult on the legislation, codes of practice and standards to ensure that the risk of failure is minimised.