Access for All
Making the Green Deal a fair deal
Project duration: August 2010 to March 2011
Due to be launched in late 2012, the Green Deal and Energy Company Obligation (ECO) are part of the Government's ambitious plans to improve the energy efficiency of hundreds of thousands of ageing UK homes over the next 20 years.
The policy aims to make people’s homes both warmer and cheaper to heat by funding energy efficiency measures at no upfront costs to the householder. But the full details of how exactly this will work remain, at this stage, unclear – nor is it clear exactly how the programme will impact on the people taking up the initiative.
Access For All is a study undertaken for Consumer Focus by CSE, the Association for the Conservation of Energy and the Energy Saving Trust, which examines the potential impact of the Green Deal and aims to highlight ways in which to make it fair and accessible to all. It was funded and published by Consumer Focus.
The report looks at various consumer groups and property types, and considers the benefits both for individual householders, as well as national policy goals for fuel poverty and CO2 emission reductions.
At the heart of the Green Deal is a methodology, known as The Golden Rule, that ensures that the savings from the installed measures are greater than the cost of paying back the loan. The repayment is then tied to the property rather than the householder, and repayments are made via the electricity bill.
The report considers the technical potential of the Green Deal: the amount by which it is possible to improve the energy efficiency of a domestic property by using one or more measures, taking into consideration the property type and the financial package, e.g. interest rates.
The analysis combined a number of datasets and tools to assess both the potential for energy efficiency measures, and the economic benefits for the wider economy. The team worked with key stakeholders to develop five scenarios for Green Deal financing. The scenarios varied in terms of which measures were supported, a cap on available financing and the interest rate used.
Typically any assessments of the Green Deal tend to focus on the policy’s potential to save energy and reduce carbon emissions. Interestingly, though, this study examined the likely targeting approach of Green Deal providers, i.e. to discover which householders are less likely to be offered a package of measures.
Looking at Experian data, households were profiled in terms of their financial risk – with risk being assessed both in terms of not being able to repay the Green Deal charge and the increased cost on energy bills of not taking up the Green Deal.
Discussion with Green Deal providers indicated that they would prefer to target households that are not financially stressed – although the Government has indicated that this will not be the case.
Access for All found the Green Deal has significant technical potential, were every household to take up the opportunity to invest in energy-saving measures.
Download a copy of the final report from here.
In the report's most ambitious scenario, the average household could reduce their bills by between £250 and £350 a year, and Great Britain could achieve CO2 savings against 1990 levels of between 22% and 29%. However this will only be achieved if the Green Deal offers consumers low interest rates and a wide range of cost and carbon-saving measures (including heating systems), and the energy market decarbonising the grid.
CSE's Ian Preston led the work on the report. He said: “Currently the Green Deal is expecting to offer householders loans with interest rates at 7% which is higher than high street lenders. If the Green Deal is to succeed we need to ensure the interest rate is competitive and consumers get a good deal.”
While examining the gaps in provision of those most in need – the fuel poor and financially-stressed households, prepayment meter users and those with cold-related illnesses – two main areas of risk are identified:
- The direct cost of taking on the Green Deal, especially those who do not qualify for the Energy Company Obligation (ECO) – these consumers may self-disconnect if they do not see the expected savings on their bills
- Increased fuel bills, as the subsidies for energy efficiency measure implemented in the ECO are recovered from fuel bills which could push householders into fuel poverty
The report also examined the barriers to uptake of the Green Deal among consumers.
The major barriers identified are practical problems in terms of delivery of the Green Deal, i.e. pre-existing issues with damp, split tenures in blocks of flats, planning restrictions on heritage buildings and possible presence of asbestos. This highlights the need for a Government-led review of the UK housing stock to bring all homes up to a standard fit for the 21st century, going beyond the already planned review of the privately rented sector.
Despite the potential of the Green Deal as assessed here, the Government’s impact assessments have shown a lower level of ambition than the least ambitious scenario assessed in this report. The CO2 savings of between 22% to 29% would require the most ambitious scenario.
The conclusion is that the scheme is only likely to be successful if: the Government supports all relevant energy and CO2 saving levels; providers are able to offer low cost financing; additional incentives are put in place; and there are assurances that those in fuel poverty are not negatively impacted.
CSE has launched a number of projects this year (2012) to prepare for the Government's forthcoming Green Deal.
Designed to test the principles behind the Green Deal, Somerset West Home Energy is a pilot project making trailblazers of residents in some parts of Somerset and in particular aims to test the Carbon and Affordable Warmth aspects of the Energy Company Obligation (ECO).
Building on our successful approach to the PlanLoCaL project, we are now running a scheme to help communities take advantage of the new initiative.