The Green Deal
Please note these details are subject to change. For current information, check here.
The Green Deal was finally launched on the 28th January 2013. It aims to be an innovative financing mechanism through which all households, whether rented or owned, can pay for energy efficiency measures to their houses with no upfront costs for the installation work.
The underlying aim of the Green Deal is to try and improve the UKs housing stock- which is among the most inefficient in Europe- in order to lower UK carbon emissions, create warmer houses and more affordable energy. In order to achieve this households will be offered a loan, financed by the Green Deal Finance Company, a non-profit making organisation backed by the government. This loan would then be repaid through the households’ electricity bill- thus tying the loan to the house rather than to a person.
In order to qualify for a loan the household must meet the ‘Golden Rule’-
“The expected financial savings must be equal to or greater than the costs attached to the energy bill”
This means that no matter what energy efficient measures you install the savings to your electricity bill must be greater than the amount of the loan you pay back each month. This is supposed to ensure that no one ends up paying any more than they are currently already paying. However, concerns have been voiced over how well assessors can predict whether the household will meet the Golden Rule over the length of the loan- see the below section on pros and cons.
There are around 45 different energy efficiency measures which qualify for Green Deal finance from heat pumps to draught proofing and many different insulation measures. A full list of eligible installations can be found here.
How it works
1. If you are interested in accessing Green Deal finance then the first thing you have to do is book an assessment. These assessments have to be done by a certified Green Deal Advisor (a list of assessors can be found on http://www.greendealorb.co.uk/consumersearch). Although there are currently no assessors registered in the Lochaber area there are companies wishing to travel to the area- please contact the office for more information (01397 700090) If you are interested in becoming a Green Deal assessor (or provider) information can be found here.
The Green Deal advisor will come round to your house to inspect your property and discuss your energy usage.
The advisor will produce a Green Deal advice report and talk you through the energy efficiency improvements suggested. They will also outline how the payments will work and what steps you might like to take next.
COSTS – Although the Green Deal finance covers costs of installation it does not cover the cost of the assessment (usually around £100). Many of the assessors will waive this cost should you go on to use them as your Green Deal provider so it is well worth investigating your assessor before booking the visit. It is hoped that as more assessors are trained up the price of the assessment will fall (if not become completely free).
2. Once you have your Green Deal advice report you are free to take this to any Green Deal provider. They will arrange the installation of the improvement (with a certified installer) and the funding of this. At this point you will sign a Green Deal Plan which is a contract between you and the provider.
3. Repayments of the Green Deal loan are made via your electricity bill with your supplier passing on your payments to your Green Deal Provider.
Unfortunately, the loan is not interest free. The Green Deal Finance Company has set the interest rates at 6.96% but individual Providers are allowed to charge anywhere between 6-9%. Again make sure you find out these figures before you settle on your Assessor. Your Provider will provide you with a fixed interest rate and a full schedule of payments (lasting between 10 and 25 years) before you sign up to the plan- so you should be able to see what you are getting in to.
There is the option of paying off the loan early should you so wish to but be aware that Providers are allowed to charge early repayment fees so make sure you weigh up all the costs first.
As the loan is tied to the house if you do move on the repayments are simply passed to the new occupier- the Energy Performance Certificate (EPC) for the house will have to show if there is a Green Deal loan attached to the electricity bill.
Pros & Cons
It is too early to tell if the Green Deal will achieve the ambitions that the government hopes it will. It definitely has its plus points- namely that it allows those who do not have the funds for energy efficiency measures to access finance and that by tying the loan to the house, rather than the person, you do not need to know what your 25 year plan is to take advantage of it.
However, there are also some glaring flaws in the financial package on offer as well. The interest rates of 6-9% are generally higher than most mortgage rates- so if you can re-mortgage it may be a better option for you. Additionally there is concern over whether having a Green Deal plan tied to your house will make it harder to sell. As mentioned above the Golden Rule is assessed on your current circumstances but every household uses energy in a slightly different way- the energy needs of a young family constantly washing nappies is very different to that of a childless couple yet they could feasibly buy a house off of each other.
It is worthwhile having a read of some of the independent assessments of the Green Deal so that you can better understand the big picture-