The Green Deal

The Green Deal was a UK government policy initiative that gave homeowners, landlords and tenants the opportunity to pay for energy efficient home improvements through the savings on their energy bills from 2012 to 2015. At the heart of the Green Deal was the rule that savings on bills would exceed the cost of the work. By meeting this 'Golden Rule', consumers were able to receive energy savings for free. Consumers then paid back the cost of such improvements through the expected savings in their energy bills. There were 45 different types of improvements available under the Green Deal, ranging from loft and cavity wall insulation, innovative hot water systems and condensing boilers to more costly measures such as solar thermal energy or solid wall insulation.

For proposed economic stimulus program in the United States, see Green New Deal. For set of policy initiatives by the European Commission, see European Green Deal.

This was a unique financial structure with no debtor, instead the burden stayed with the property no matter the tenant. This means new tenants or owners become liable for the payments for the energy efficiency improvements, requiring new legislation in English law. Government estimates say that a typical three bedroom semi-detached house could save £270 a year from solid wall insulation.[1]

It was hoped the Green Deal would 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.[2]

History

It was given a 'soft' launch by the Department of Energy and Climate Change on 1 October 2012 to permit improvements for energy saving measures for properties in Great Britain and was officially launched in January 2013. Following this, the first Green Deal Plans were available from 28 January 2013.[3] The registers of Green Deal Installers, Green Deal Assessors, Green Deal Advisers and Green Deal Providers became active at the launch in October 2012. In its first six months 38,259 Green Deal assessments had taken place. However, only four Green Deals had been taken out [4] due to the finance not available until Green Deal Plans formalised on 28 January 2013.

Green Deals were repaid at a rate no more than 6.92% fixed rate unsecured over the life, up to 25 years - this lower rate and duration are unprecedented in high street finance or available loans. The finance were mistakenly compared to home loans of similar duration, but had limited periods of fixed rates of 5 years or less, and secured against the house.[5] Surveys found little awareness among the general public for the Green Deal.[6] The mistakenly perceived high interest rates and charges of the scheme were heavily criticised.

Lack of demand for the Green Deal was partly due to the ECO grant programme, which gave homeowners substantial grants in competition to the Green Deal[7]. This 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.[8]

In 2014 a second Green Deal was launched, as grants rather than the loans which had underpinned the original scheme[9] 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.

While the Department of Energy and Climate Change reached its target for the schemes to improve 1 million homes by March 2015, it also made the decision in July 2015 following the election of Conservative Government The Energy Secretary Amber Rudd announced the Green Deal would be scrapped [10]. There was no opposition to the scheme being scrapped but there was concern that there was no replacement scheme.[11] 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[12]

How it worked

Homeowners would make energy-saving improvements to their home or business without having to pay all the costs up front through the Green Deal. [13]

First, an assessment was conducted by a government registered assessor of the property to see what improvements could be made and how much it could save on energy bills.

Secondly, the homeowner would choose a Green Deal provider to carry out the work. Only work that would reduce the energy bill highlighted by the assessor would qualify.

Thirdly, a Green Deal plan was signed. This is a contract between homeowner and the provider stating what work will be done and how much it will cost. The provider will then arrange for a Green Deal installer to do the work. The funding for these measures is then issued by The Green Deal Finance Company (GDFC)

Lastly, once the work was complete, the homeowner or tenant would pay off the cost in instalments through their electricity bill.

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.

Improvements covered

Initial list of improvement measures available under the Green Deal;

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 [14] 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 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.[15] Fears of low take up of the Green Deal has led Government to budget £200 million to encourage early uptake.[15] 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.[16][17]

The building industry has raised concern about the lack of stimulus to drive demand for the uptake of the Green Deal.[18] Other worries include its limited projected coverage to consumer protection, its treatment of non-domestic buildings and lack of competition among suppliers.[19] Government has confirmed the Green Deal for business has been put on hold for the foreseeable future.[20]

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.[21] [22]

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.

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.[23] 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".[24]

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.[25]

Interest rate

The 7% interest rate of the Green Deal Plan has been extensively criticized since it was revealed at the scheme's launch, as it is higher than available high street home-loans. Although the Green Deal Plan was a fixed rate for the life of the energy improvement (up to 25 years) and unsecured, it was compared to secured home loans of similar life but only short periods of fixed interest rate. This hysteria 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.[26] The high interest rate has raised concerns that the Green Deal will not meet its golden rule.[27]

Mortgageability questions

If you move into a property with a Green Deal, the landlord or seller must show you a copy of the Energy Performance Certificate - this will explain what improvements have been made and how much you’ll need to repay. The person who pays the electricity bill pays the money back - so if you’re a tenant in a rented property, you’ll be paying back the costs, not the landlord. This is because the tenant can expect to benefit from lower energy costs.[28]

The Council of Mortgage Lenders have issued guidelines,[29] but have stated "Lenders will make their own individual commercial decisions in response to the Green Deal, and these may vary."

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.[30]

Risk of overheating

Research studies by Prof Chris Goodier of Loughborough University and Prof Li Shao of the University of Reading highlighted potential risks of overheating in dwellings via over insulating households[31]. The Green Deal had two measures built in to ensure this would not occur, firstly, the "Golden Rule" and secondly, each measure must be assessed through Energy Performance Certificate.

Accuracy and consistency of assessments

Research for DECC, by Heriot-Watt University's Urban Energy Research Group, suggested concerns over the reliability of Green Deal Energy Assessments, particularly when using such assessments for structuring loan repayments around predicted energy savings. The consistency of these assessments, and more general concerns with using an EPC-related energy assessment process in this way, was overviewed in the commissioned DECC report[32] and follow-up research article.[33]

The Green Deal Home Improvement Fund

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.[34]

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.[35]

Core offer 1

Up to £1,000 for installing two energy saving improvements from the list of 12 eligible measures below:

  1. Condensing mains gas boiler
  2. Fan assisted storage heaters
  3. Flue gas heat recovery
  4. Replacement warm-air unit
  5. Waste water heat recovery
  6. Cavity wall insulation
  7. Flat roof insulation
  8. Floor insulation
  9. Room in a roof insulation
  10. Double/triple glazing (replacing single glazing)
  11. Secondary glazing
  12. 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.[36]

The Green Deal Finance Company

The Green Deal Finance Company (TGDFC) was a £14 billion industry led consortium with over 50 members from across the industry, both public and private sector. The Company was incorporated in March 2012 as a not-for-profit mutual limited by guarantee. It is a national aggregator designed to make finance available to all accredited Green Deal Providers on an equal and open basis. By operating at a national level, it intends to minimise the operating and administration costs of Green Deals and will aim to access the cheapest sources of finance in the market at the highest possible credit rating. It worked closely with the Department of Energy and Climate Change (DECC) and the Green Investment Bank, together with a number of Local Authorities, with a view to maximising its assistance to the Green Deal market [37].

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See also

References
  1. "The Green Deal energy efficiency scheme launches - should you borrow for home improvements?". 28 January 2013.
  2. "The Green Deal?". Greendeal.co.uk. Retrieved 15 May 2012.
  3. "DECC commits to Autumn launch of Green Deal". Greendealcertified.com. Retrieved 9 September 2012.
  4. "Only four people sign up for flagship Green Deal". BBC News. 27 June 2013.
  5. "'Energy efficiency' Green Deal launched by government". BBC News. 28 January 2013.
  6. Vaughan, Adam (23 January 2013). "Four out of five people have not heard of green deal, poll finds". The Guardian. London.
  7. Harvey, Fiona (21 July 2011). "Renewable energy heating grants available for UK households". the Guardian. Retrieved 5 September 2018.
  8. "Up to 600 jobs at risk at leading insulation company". 4 July 2014.
  9. "New Green Deal is very generous, says energy secretary". BBC News. 9 June 2014.
  10. "Household Energy Efficiency Schemes inquiry". UK Parliament. Retrieved 5 September 2018.
  11. "Green Deal funding to end, government announces". BBC News. 23 July 2015.
  12. https://www.theguardian.com/environment/2015/jul/23/uk-ceases-financing-of-green-deal
  13. "Green Deal: energy saving for your home or business - GOV.UK". 5 February 2013. Archived from the original on 5 February 2013. Retrieved 5 September 2018.
  14. "DECC gives clarification on Green Deal". Retrieved 1 July 2012.
  15. Cuff, Madeleine (4 April 2012). "M&S and Tesco missing from list of first green deal providers". The Guardian. London.
  16. Carrington, Damian (16 April 2012). "Green deal plot reveals new levels of idiocy from Tory climate sceptics". The Guardian. London.
  17. Hennessy, Patrick (14 April 2012). "Top Tories try to torpedo Green Deal". The Daily Telegraph. London.
  18. "Greg Barker clashes with building industry over coalition's Green Deal plans - 01 Mar 2011 - News from". BusinessGreen. 1 March 2011. Retrieved 12 February 2012.
  19. "Green Deal proposals for home upgrades still lack credibility". Endsreport.com. Retrieved 9 September 2012.
  20. "Green Deal delayed for Commercial Buildings". Endsreport.com. Retrieved 9 September 2012.
  21. "Industry warns of rocky road to Green Deal success - 20 Oct 2011 - News from". BusinessGreen. 20 October 2011. Retrieved 12 February 2012.
  22. Juliette Jowit (24 November 2010). "Green Deal is not a good deal for all homeowners | Juliette Jowit | Environment | guardian.co.uk". London: Guardian. Retrieved 12 February 2012.
  23. Carrington, Damian (16 May 2012). "David Cameron briefed on concerns over green deal for homeowners". The Guardian. London.
  24. "Warning over conmen posing as Green Deal assessors". BBC News. 10 May 2013.
  25. Read, Simon (1 February 2013). "Critics say Coalition's Green Deal is no solution to curse of fuel poverty". The Independent. London.
  26. Gosden, Emily (31 January 2013). "Green Deal provider Npower warns scheme's interest rates are too high". The Daily Telegraph. London.
  27. Gammell, Kara (31 January 2013). "Green Deal: £99 for a 'flawed' assessment". The Daily Telegraph. London.
  28. "Green Deal: energy saving for your home or business - GOV.UK". 6 April 2013. Archived from the original on 6 April 2013. Retrieved 5 September 2018.
  29. "CML Guidelines". cml.org.uk. Retrieved 30 January 2013.
  30. "Investors' needs likely to compromise Green Deal".
  31. Green Deal 'could lead to deadly summer overheating' by Brian Wheeler, Political reporter, BBC News, 8 July 2013, last updated at 14:47 https://www.bbc.co.uk/news/uk-politics-23180965
  32. "Green Deal Assessment Mystery Shopping Research".
  33. Jenkins, David; Simpson, Sophie; Peacock, Andrew (1 November 2017). "Investigating the consistency and quality of EPC ratings and assessments". Energy. 138: 480–489. doi:10.1016/j.energy.2017.07.105.
  34. DECC
  35. "Applications to the Green Deal Home Improvement Fund close".
  36. "Green Deal Home Improvement Fund GDHIF". May 2014.
  37. "Wayback Machine". 18 July 2013. Archived from the original on 18 July 2013. Retrieved 5 September 2018.
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