The Green Deal was a UK government policy. It was given a 'soft' launch by the Department of Energy and Climate Change on 1 October 2012 to permit loans for energy saving measures for properties in Great Britain and was officially launched in January 2013. These measures were designed to enable consumers to benefit from energy efficient improvements to their home. 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. Homeowners (or businesses) will be liable to repay the Green Deal charge, even if the promised saving on their energy bills does not materialize. The intention is that savings on energy bills will outweigh the cost of repayments. This is referred to by DECC as the golden rule. However, the so-called "Golden Rule" isn't so much a rule as an aspiration. 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 28 January 2013.
Although Green Deal assessments could be conducted from 1 October 2012, none were done in the first month and only five had been completed nationwide by 28 January 2013. The scheme requires an assessment of £150 or more to determine what if any work can be done. The cost of this is likely 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 criticized.
In its first six months 38,259 Green Deal assessments had taken place. However, only four Green Deals had been taken out.
Lack of demand for the Green Deal with cuts to the ECO programme have left the energy efficiency industry struggling, the lack of demand has led one company, Domestic & General Insulation, to completely withdraw from the market and will likely lay off 600 staff.
In 2014 a second Green Deal was launched, as grants rather than the loans which had underpinned the original scheme
In July 2015 following the election of Conservative Government The Energy Secretary Amber Rudd announced the Green Deal would be scrapped as it had failed to deliver its objectives. There was no opposition to the scheme being scrapped but there was concern that there was no replacement scheme. In total 15,000 Green Deals had been issued. Former Climate Change Minister Greg Barker stated he was confident that the private sector would pick up the slack from the withdrawal of Government funding
Video The Green Deal
How it worked
The registers of Green Deal Installers, Green Deal Assessors, Green Deal Advisers and Green Deal Providers became active at the launch. Property Assessments can now be undertaken by Green Deal Assessor Organisations (GDAO) and Installations under the Energy Company Obligation can now take place by certified installers. Following this, the first Green Deal Plans were available from 28 January 2013. Although the Department for Energy and Climate Change (DECC) stated that the first Green Deal plans would 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 has to be employed to perform an inspection of the property to provide a report on advised energy improvement measures. A green deal advice report is only valid when produced by a green deal advisor that complies with (NOS) standards. The funding for these measures is then issued by the green deal finance company (GDFC); following this the Green Deal Provider and a Green Deal Installer will 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.
Gemserv has been contracted as the scheme administrators for the Green Deal Oversight and Registration Body (GD ORB), alongside its role of operating the Microgeneration Certification Scheme(MCS) and the Biomass Suppliers List (BSL). The GD ORB manages scheme administrative functions, such as maintaining the public registers of authorised participants and participant helpdesk; as well as working alongside industry and government to further develop and share best practice in operational processes, and raising awareness about consumer protection issues.
Following the Renewable Heat Incentive announcement and three consultations which were published by DECC in September 2012, it is proposed that the Renewable Heat Incentive 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 i.e. a property could then look to use the Green Deal to achieve this standard.
Fabric First: Insulation issues are commonly the first measures that need to be improved for a household to be more energy-efficient. A Green Deal Assessor will note internal insulation, external insulation, windows, doors and draught excluders. Once these have been updated, other things... such as boilers, solar power panels, rainwater harvesters and other green technologies, can all be studied and implemented.
On 1 May, the Government announced the new Green Deal Home Improvement Fund (GDHIF), a new energy efficiency incentive available to households in England and Wales for taking measures to improve the energy efficiency in their homes. The households will be eligible to claim up to £7,600 for improving their homes. The Incentive went live on 9 June 2014.
Maps The Green Deal
The Green Deal Home Improvement Fund (GDHIF)
The Green Deal Home Improvement Fund (GDHIF) is a new incentive scheme open to all householders in England and Wales wanting to improve the energy efficiency of their homes.
The scheme allows Householders to choose one or both of the two core offers available and may also be eligible to claim up to £7,600 as a bundled package. The policy closed to new applications on 24 July 2014
Core Offer 1
Up to £1,000 for installing two energy saving improvements from the list of 12 eligible measures below:
- Condensing mains gas boiler
- Fan assisted storage heaters
- Flue gas heat recovery
- Replacement warm-air unit
- Waste water heat recovery
- Cavity wall insulation
- Flat roof insulation
- Floor insulation
- Room in a roof insulation
- Double/triple glazing (replacing single glazing)
- Secondary glazing
- Energy efficient replacement doors
Core Offer 2
Up to 75% of the total cost of the installation of internal or external solid wall insulation, up to a maximum value of £6,000, making this high carbon saving improvement much more affordable.
Core Offer 3
Householders can also claim a refund of up to £100 for a Green Deal Assessment Report (GDAR) that is less than 24 months old when they do work in this scheme.
Core Offer 4
An additional bonus of up to £500 for homebuyers who have bought a home in the last 12 months prior to application.
Requirements
To be eligible for the GDHIF scheme offers householders must satisfy the following incentive criteria:
- Customers must apply for the voucher before the work starts
- Measures must be recommended in an Energy Performance Certificate (EPC) or GDAR carried out in the last 24 months
- The GDHIF can work with Green Deal Finance which could be used to help to pay for some of the costs of installation
- Customers will not be eligible for the GDHIF incentive if they receive ECO or other central Government funding, on the energy saving improvements applied for under GDHIF
This scheme closed on 24 July, due to overwhelming demand. In October 2014 however, the Government announced an additional £100m of funding would be made available for the GDHIF phase 2 although further details are yet to be revealed.
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 source heat pumps
- 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 criticized 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 - the 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 criticized by the Citizens 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 criticized 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 mis-selling 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 an assessor, with many assessors 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."
David Cameron has defended the Green Deal, stating that despite the lack of interest from the general public and a slow take-up, the policy was never intended to start with a big bang, but rather to build slowly. Nevertheless, the government has invested heavily in generating early uptake by consumers.
There have also been issues with conmen posing as Green Deal assessors. Trading standards officers have reported that cold callers are posing as Green Deal assessors while charging "administration fees"
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 the 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, according to 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 criticized since it was revealed at the scheme's launch. Interest rates of more than 7% are significantly higher than available high street loans. This has led to some Green Deal providers such as Npower raising concerns about the high rates, adding that, unless they were reduced, the scheme would fail. The high interest rate has raised concerns that the Green Deal will not meet its golden rule.
In order to attract investors, the Green Deal may need to be altered, compromising its original objective. The range of investors it had been assumed would underpin the Green Deal would require returns of 11%-15%, thus there is a 4-8 percentage point shortfall between what is needed to make the Green Deal attractive to investors and what the Government has set as the loan interest rate.
Analysis by engineering consultants, Buro Happold, concluded that most of the benefits from lower bills as a result of Green Deal installations would go to investors rather than occupants. Based on their gaming workshops, they estimate that consumers will see just 8% of any bill savings, with the remaining 92% going to investors. For a £20,000 investment that saved £500 a year, just £40 a year would accrue to occupants. The main benefit to occupants would be free refurbishment and increased comfort rather than financial savings.
Mortgageability questions
It is not yet entirely clear what kind of legal entity is applied by 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 Mortgage 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 lender's 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. Buro Happold, in a report on the Green Deal, suggested there should also be more information on its wider implications, such as how it impacts fuel poverty, property value and re-saleability. The researchers also warn that the as yet unknown impact on the resale value of homes from refurbishments and Green Deal debts attached to the property could deter uptake.
Risk of overheating
Research studies by Prof Chris Goodier of Loughborough University and Prof Li Shao of the University of Reading indicate risks of overheating in dwellings to which Green Deal improvements have been made. The risk of overheating has been overlooked in the "big rush to insulate and make homes airtight" in order to protect against the cold in winter. This is a particular problem as more extreme weather, including heatwaves, is being predicted for the UK by meteorologists. This would be most likely to affect elderly or otherwise vulnerable residents living in urban areas in "top floor flats in 1960s tower blocks, and modern detached houses ... particularly if they were south facing."
Energy Company Obligation (ECO)
The Department of Energy and Climate Change (DECC) wants energy companies to make improvements to some homes at no upfront cost to the consumer.
The scheme is funded by energy suppliers with the aim of increasing energy efficiency and decreasing household energy bills in the UK.
The Energy Company Obligation (ECO) is aimed at helping those in vulnerable 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 finance for the works. The ECO takes over from existing obligations such as CERT, CESP and the Warm Front.
There are two main energy efficient measures which the ECO will look to implement:
- Those measures include hard to treat cavity wall insulation, and solid wall insulation (internal or external).
- People living in low income areas are eligible for further energy efficiency measures such as loft insulation and Gas Boilers.
- People on certain benefits who live in a private property may qualify for more energy efficiency measures, including boiler repairs or replacements.
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 would be likely to lead to cost efficiencies, lowering the cost of delivering ECO.
Changes to the Energy Company Obligation are currently being consulted on by DECC.
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
External links
- Green Deal - Department of Energy and Climate Change
- Green Deal Oversight and Registration Body
- Insulation Green Deal
- Role of Green Deal Providers in Green Deal
- Largest Provider Of Green Deal Grants For Scotland
Source of article : Wikipedia
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