Can the Green Deal make energy efficiency the next big thing in home improvement?

  • 24 Jan 2013, 15:00
  • Robin Webster

The government is due to launch its flagship energy efficiency scheme, the Green Deal, on Monday. At a press conference yesterday, climate change minister Greg Barker insisted that the programme will make energy efficiency measures the next big thing in home improvement. But others seem less than enthusiastic. We cast an appraising eye over the government's big green baby. 

The Green Deal is basically a loan scheme. It will allow householders to take out a loan from the government to fund measures to improve the energy efficiency of their home - these could include double glazing, an upgraded boiler, or cavity wall insulation. The works will be delivered by registered suppliers and the householder pays the loan off through a surcharge on their energy bill.

There appear to be some teething problems the media has picked up on in recent weeks, and here we take a look at them.

1. Consumer awareness 

Householders have been able to sign up for the scheme since last October, but takeup has been slow. This morning, the Telegraph claims just five households - or maybe two - have signed up to the deal so far. But that's a step up from in October when it reported none had done so. 

It appears that consumer awareness of the scheme is not high. According to a YouGov poll for consumer group uSwitch yesterday, four out of five people have never heard of it. 

The Department of Energy and Climate Change (DECC) argues it has yet to launch its £3 million communications campaign for the scheme. At the press conference yesterday, ministers emphasised that they're expecting the Green Deal could take "decades" to reach its full potential - so it will be a long haul. But the media has been critical of such a low key launch, suggesting that the ambition of the scheme may have been watered down

The uSwitch poll does contains some good news for the government. According to its press release (unfortunately uSwitch declined to share a copy of its polling results), 67 per cent of respondents were interested in "making [their] home more energy efficient" and 61 per cent expressed an interest in the Green Deal once the scheme was briefly explained. These results were less widely reported, however. 

2. The financing: A £10,000 debt? 

The government has promised that a household's energy bill will not go up overall as a result of taking out a loan - the so-called golden rule. Installers must, in theory, ensure savings from installing the efficiency measures will equal or surpass the amount spent on them.

The Daily Mail reports householders "can take out a £10,000 loan to make energy efficiency changes". But this is an upper limit, not a fixed amount. With a range of options on offer, presumably only the really keen will choose to borrow £10,000. 

It adds that because the  "£10,000 debt is tied to the home" - not the individual who takes it out - it could make a property harder to sell. This is an argument the Telegraph also makes. A DECC official said mortgage lenders have been supportive of the scheme, although how that affects homebuyers' views on it presumably remains to be seen. 

In today's Telegraph, shadow energy and climate change secretary, Luciana Berger claims that consumers may be put off the scheme by having to pay back the money loaned under the scheme at an interest rate of "around 6.9 per cent". 

A spokesperson from the Department for Energy and Climate Change (DECC) told us that 6.9 per cent is the expected rate - not yet confirmed - at which the government will lend money to the new Green Deal Finance Company (TGDFC), which then makes some of the Green Deal loans to consumers. 

DECC argues that this doesn't necessarily mean that consumers will have to pay the money back to TGDFC at the same interest rate. It also claims consumers will also be able to "shop around to get the best deal", not necessarily borrowing from TGDFC. Make of that what you will. The most important part of the equation, DECC says, is the golden rule, which still should mean consumers pay no more on their bills than they did before they installed the measures. 

There's also a £120 fee for an initial assessment by a Green Deal advisor on households' efficiency needs. The Telegraph says this could put households off - especially poorer ones. 

3. Intrusion and inspections 

It's fairly well known in the energy policy world that, whatever modelling says about the benefits of reducing energy consumption, there are social barriers. It means upheaval and can involve strangers tramping around the loft. In addition, as the Telegraph reports today, the Green Deal includes some assessment of a householder's income - which some might find intrusive.  

The government says it's trying to address customer concerns, at least about how trustworthy the people invading the loft will be. DECC has created a special certification body, which assesses whether companies can be Green Deal advisors or installers, an ombudsman to resolve complaints about Green Deal suppliers, and a code of practice. Ministers also said there's an advice line for consumers.  

It needs to work

Getting the Green Deal up and running is clearly an epic task. The complications around financing the scheme, and the challenge of upgrading the UK's leaky housing stock are intimidating. 

Ministers talk confidently of a programme that is going to run in the long-term, providing businesses with the certainty they need to spend money training staff. The media, meanwhile, appear to be on the lookout for holes in the scheme.

Any such faults could have a big impact on consumer energy bills. As DECC's website outlines, the department projects that its energy efficiency policies will bring down consumer bills relative to what they would have been if the measures weren't in place.

But that depends on the Green Deal being a success. For the government, the Green Deal is a crucial part of the argument that policies will protect consumers from energy bill price hikes. But no takeup would mean no limiting effect on energy bills. We'll wait and see.

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