The Green Deal

The Green Deal is UK government policy, it was launched by the Department of Energy and Climate Change on 1 October 2012 to permit loans for energy saving measures for properties in Great Britain. The loans are repaid through energy bills and transfer with the property rather than those who took out the loan, this means new tenants or owners become liable for a debt they did not enter into, a novel concept in English law.. There are 45 different improvements covered by the Green Deal and Government estimates say that a typical three bedroom semi-detached house could save £270 a year from solid wall insulation. The loans became available on 28th January 2013. Though assessments could be conducted from 1st of October none were done in the first month and only five had been completed nationwide by 28th January 2013. The scheme requires an assessment of £150 or more to determine what if any work can be done. The cost of this has been suggested to deter many people. The Government believes Green Deal loans will be repaid at a rate no more than 6.92%, This is significantly higher than average household loans. On a loan of £5,000, the overall rate that is repayable is just under 8% over 10 years, or 7.7% over 25 years. Further to these charges there will be an initial set up charge followed by a £20 annual fee, failure to repay a Green Deal will lead to disconnection of gas and electricity supplies. Recent surveys have found little awareness among the general public for the Green Deal The high interest rates and charges of the scheme have been heavily critised.

How it works

The registers of Green Deal Installers, Green Deal Advisors and Green Deal Providers became active at the launch. Property Assessments can now be undertaken by Green Deal Advisory Services and Installations under the Energy Company Obligation can now take place. Following this, the first Green Deal Plans will be available from 28 January 2013. Although the Department for Energy and Climate Change (DECC) has stated that the first Green Deal plans will not be confirmed until January 2013, Green Deal Assessments performed by Green Deal Advisors took place from 1 October 2012. DECC proposes tying low interest loans of estimated 7%, issued by Green Deal Providers for energy efficiency improvements to the energy bills of the properties the upgrades are performed on. These debts would then be passed onto new occupiers when they take over the payment of the bills. However, recent reports show a high number of UK energy customers are in considerable debt..

A Green Deal Advisor will perform an inspection of the property to provide a report on advised energy improvement measures. The funding for these measures is then issued by the Green Deal Provider and a Green Deal Installer will then install the measures. It is hoped the Green Deal will lead to the renovation of the UK's housing stock with an estimated 14 million homes seeing energy efficiency improvements ranging from; double glazing, cavity wall and loft insulation through to gas and oil boilers, and renewable technologies such as solar PV, solar thermal and heat pumps.

The Green Deal was included in the Energy Act 2011 and came into force on 1 October 2012. DECC announced a list of pioneer Green Deal providers in April 2012. Twenty two providers, including three of the biggest six energy companies and B&Q, (the only high street name) have signed a declaration stating they intend to become Green Deal Providers, once DECC had appointed the Green Deal Oversight Body. Other expected providers such as Tesco, Marks and Spencer and the other three major energy companies were missing from the list. Fears of low take up of the Green Deal has led Government to budget £200 million to encourage early uptake. The policy caused a rift in the Coalition Government in April 2012. Senior Conservative ministers, including Eric Pickles ( Communities and Local Government Secretary), called for the scheme to be scrapped as it could cost the so called "squeezed" middle, thousands of pounds. The Green Deal will rely on the Consumer Credit Act to provide safeguards for those taking out green deal loans.

The Green Deal oversight body has been confirmed as Gemserv, who also maintain the Microgeneration Certification Scheme(MCS). On 8 August 2012, the Green Deal Oversight Body website went live, with a register of approved Green Deal Certification Bodies, Green Deal Providers, and Green Deal Installers and Advisors. This has proved controversial as Gemserv has been criticised in its delivery of the MCS scheme and it is also owned by the big 6 energy companies and has faced allegations of bias particularly against small businesses.

Following the Renewable Heat Incentive announcement and three consultations which were published by DECC in September 2012, it is proposed that the RHI will be linked to the Green Deal if a property does not meet the minimum energy efficiency requirements to have a renewable heat technology installed ie. a property could then look to use the Green Deal to achieve this standard.

Improvements covered

Heating, ventilation and air conditioning

• Condensing boilers
• Heating controls
• Under-floor heating
• Heat recovery systems
• Mechanical ventilation (non-dom)
• Flue gas recovery devices
• Ground and air source heat pumps

Building fabric

• Cavity wall insulation
• Loft insulation
• Flat roof insulation
• Internal wall insulation
• External wall insulation
• Draught proofing
• Floor insulation
• Heating system insulation (cylinder, pipes)

Lighting

• Lighting fittings
• Lighting controls

Water Heating

• Innovative hot water systems
• Water efficient taps and showers

Fenestration

• Energy Efficient Glazing and Doors

A further 15 Green Deal measures have been confirmed and include;

• Chillers
• Duct Insulation
• HVAC Controls
• Hot Water Controls
• Hot Water Showers
• Hot Water systems
• Hot Water taps
• Pipework Insulation
• Roof lights, lamps and luminaires
• Radiant heating
• Sealing improvements
• Solar blinds, shutters and shading devices
• Transpired solar collectors
• Variable speed drives for fans and pumps
• Water Source Heat Pumps

Criticism

The Green Deal has been criticised by a broad range of groups such as Consumer Focus, Friends of the Earth and the Smith School of Enterprise. These criticisms have ranged from a fear that it will increase fuel poverty to concerns over the viability of the bundled loans as securities following the similar financial products that were created from US housing which led to the 2008 financial crisis. The building industry has raised concern about the lack of stimulus to drive demand for the uptake of the Green Deal. Other worries include its limited projected coverage to consumer protection, its treatment of non-domestic buildings and lack of competition among suppliers. Government has confirmed the Green Deal for business has been put on hold for the foreseeable future.

There has also been doubts cast over whether the central tenet of the scheme - a so-called "Golden Rule" whereby the cost of repayments never outweighs the savings on the bill - will actually be successfully implemented. There is also criticism that it will only benefit the middle class and not be of any help to those most in need and the working class. The Green Deal has also been criticised by the Citizen Advice Bureau for its lack of protection for consumers, particularly those inheriting a Green Deal when taking over a property The policy has also been criticised by senior Conservative MPs, when it was revealed that for any work on a property to get planning permission it would also be forced to take on a Green Deal. This has been dubbed a 'conservatory tax' by the media. Consumer Focus has also raised concerns about the lack of consumer redress, particularly for those who inherit a Green Deal. This secondary misellling would mean that unless the Green Deal provider issued a transferable warranty for the works under current contract law, the new occupiers who had not agreed the original contract would be unable to get compensation or repairs if the Green Deal installation was later found to be faulty, for example causes damp.

While The Green Deal is primarily concerned with buildings' energy efficiency, it is often associated with reducing carbon emissions, and mitigating climate change. However, the effects of Jevons Paradox, and cash savings being spent on other products and services with associated carbon footprint, means that The Green Deal may not reduce carbon emissions, unless there is a corresponding supply-side constraint, keeping coal, oil and gas underground.

The choice of Gemserv as the certification body has also provoked criticism as it is owned by the 6 largest energy companies in the UK and so will act as a barrier to small businesses being certified and thus benefiting from the green deal. This would undermine DECC objective of promoting green growth with the scheme.

The quality of the assessments have been called into doubt. A 2 day course is all that is required to become a assessor with many relying on a software package to make recommendations rather than any expert knowledge.

Luciana Berger MP, the shadow Climate Change minister, warned: "Because of sky-high interest rates, hidden charges and penalty payments, the reality for most people will be that the Green Deal ends up costing them more than they save."

lan Milstein, of the Residential Property Surveyors Association. "With early repayment penalties and the uncertainty surrounding how having a Green Deal loan attached to your property will impact on its future saleability, for many homeowners it may be advisable to look at alternative ways to fund any energy efficiency measure"

Fuel Poverty

The scheme has faced heavy criticism that it will do nothing to combat the rising levels of fuel poverty in the UK. As with the closure of the Warmfront scheme the UK no longer has any policies specifically targeted at lowering fuel poverty.

The Government's impact assessment estimates that Green Deal will lead to 125,000 to 250,000 households being lifted out of fuel poverty by 2023. But that's nowhere near enough, said Michelle Mitchell, charity director general at Age UK.

"The Government's target of lifting just 250,000 households out of fuel poverty over the next 10 years is tantamount to trying to bail out a sinking boat with a teacup; in the last month alone another 300,000 households have joined the ranks of the fuel poor," she pointed out.

Interest Rate

The high interest rate of the Green Deal has been extensively critised since it was revealed at the scheme's launch. Interest rate of more than 7 percent are significantly higher than available high street loans. This has lead to some Green Deal providers such as Npower to raise concerns about the high rates and that unless they were brought down the scheme would fail. The high interest rates has raised concerns that the Green Deal will not meet its golden rule.

Mortgeability Questions

It is not yet entirely clear what kind of legal entity is applied to the Land Registry documentation to properties that have received Green Deal loans, or how the mortgage providers will treat those properties when the property is resold or remortgaged. The Council of Morgage Lenders have issued guidelines, but have stated "Lenders will make their own individual commercial decisions in response to the Green Deal, and these may vary." Furthermore within the background documentation the final paragraph raises questions around the core functionality of the deal: "It is not altogether clear why consumers will be attracted by Green Deal finance at not especially low interest rates. In addition, since the golden rule is to be met only “on average”, in some cases energy bill savings might not cover the cost of the Green Deal measures and plan. There are therefore considerable concerns about take up of the Green Deal." The CML has also expressed concern over a lenders liability for Green Deal finance in the case of mortgage default.

One potential outcome appears to be not achieving the stated energy cost savings, paying more than necessary for the changes via a limited pool of providers, financed by an uncompetitive loan, that subsequently renders the property difficult or impossible to sell or remortgage.

Energy Company Obligation

The Department of Energy and Climate Change (DECC) wants energy companies to make improvements to some homes at no upfront cost to the consumer. So the Energy Company Obligation (ECO) is aimed at helping those in disadvantaged and hard-to-treat homes. ECO will be funded by the big energy suppliers and they look to implement measures worth around £1.3 billion every year. This cost will be passed onto all consumers through their energy bills. Where the cost of the work outweighs the savings, or people need that financial help, energy suppliers may be able to top-up that loan. The ECO takes over from existing obligations which are due to end in December 2012. The Carbon Emissions Reduction Target (CERT) is a requirement for domestic energy suppliers with a customer base larger than 250,000 to reduce the carbon emissions made by householders. Also the Community Energy Saving Programme (CESP) targets the 4,500 eligible households in the UK with occupants living on low incomes. These were also funded by energy suppliers. The two measures will now be incorporated and will address energy efficiency in the domestic sector.

There are four main energy efficient measures which the ECO will look to implement, but not all households will be eligible.

• Those measures include cavity wall insulation, external or internal solid wall insulation, loft insulation and heating improvements.

• People on certain low income benefits may qualify for all four in they live in a private property.

• Those on low income and living in social housing in a rural community and people living in a low income community may qualify for all three, apart from heating improvements.

• People living in older properties may benefit from cavity wall, external or internal solid wall insulation.

In April a pilot scheme was tested by a partnership consisting of the Centre for Sustainable Energy, Scottish and Southern Energy, and Sedgemoor, Taunton Deane and West Somerset local authorities. The “Somerset West Hard to Treat” pilot scheme was so successful it led to the creation of a much larger programme aimed at better understanding of the Green Deal and ECO. In a speech about the ECO programme Deputy Prime Minister Nick Clegg said: “It is shameful that the UK still has so many families unable to heat their homes.” The government has now passed a legal obligation onto the energy companies to meet the full costs of implementing the ECO. DECC has stated that the emergence of a competitive Green Deal Provider market is likely to lead to cost efficiencies, lowering the cost of delivering ECO.

See also

• CRC Energy Efficiency Scheme
• Climate Change Agreement
• Capital allowance
• Energy policy of the United Kingdom
• Energy use and conservation in the United Kingdom
• Renewable Heat Incentive
• Renewables Obligation
• United Kingdom Climate Change Programme
• Feed-in tariffs in the United Kingdom

References

Green Deal Latest News Government Cashback Incentive

External links

• Green Deal - Department of Energy and Climate Change