/ Home & Energy

What’s the real story behind the Green Deal?

A green magnifying glass

The government has confirmed that 38,000 Green Deal assessments have been carried out since the launch of the scheme, but only 245 people have signed up. Or is that four people?

As someone who keenly follows almost any energy-related news (yes, I really am that interesting), there has been a recent, recurring story that’s been getting on my nerves.

It’s not the latest attack on renewables, shale gas, nuclear or whichever type of energy generation seems to be getting a kicking this week. Nor is it the desperate attempt by the regulator Ofgem to persuade us its reforms really will transform the retail energy market.

Instead it is the occasional, but steady, stream of stories telling us that only one or two or four or maybe as many as 100 people have taken out a Green Deal loan.

Why so mysterious?

Why do these stories irritate me? Well, being an energy geek, I want much more information. Who are these people who have taken out a Green Deal loan? Which provider did they take it out with? And what interest rate were they offered?

Let’s remind ourselves why the Green Deal matters. This is the government’s flagship energy efficiency policy. At a time of rising energy prices, when no government money is available to help with bill hikes, the government has thrown most of their eggs into the Green Deal basket to solve the problem of Britain’s badly insulated homes.

The Green Deal is meant to be a game-changer. While the government hates referring to it as a loan, it allows you to pay upfront and give your home an energy efficiency retrofit. You then pay off the costs via your electricity bill.

So those of us who closely followed its development – and pressed the government to improve the idea – have been waiting to see if it would succeed since its launch at the beginning of 2013.

38,000 assessments, 245 (or four) sign ups

Which brings us to the crunch point – yesterday’s publication of how the Green Deal has gone down with the public over its first six months. While ministers have tried to suggest that the number of people signing up is encouraging, the figures look worryingly low to us.

According to the government, 245 households want to take out Green Deal finance. But even this figure is stretching it. In fact, only four people have signed on the dotted line – while the rest have confirmed that they ‘wish to proceed’. This is out of a total of over 38,000 assessments.

Of course, it is early days for the Green Deal. The government believes that many people get an assessment and then pay for improvements through other means (perhaps with savings, or by taking out a traditional loan). And they also argue that while people have been able to get assessments for months, the finance is only just becoming available.

Hard to compare Green Deal deals

This brings me to my final point. The fact is that anyone who gets a Green Deal assessment should be able to shop around to find the best deal for them. People need to have information about the range of Green Deal finance options on offer – so they can see who will give them the best interest rate.

Yet this information is sadly lacking from yesterday’s announcement. Which? is still trying to find out which companies are offering Green Deal finance and what their terms and conditions are. Without this information it will be impossible for people to decide whether the Green Deal will be good value for them.

Unless people can see the benefits of the Green Deal, take up is likely to remain low.

Comments
Member

“Unless people can see the benefits of the Green Deal, take up is likely to remain low.”
Yes I agree but where are these benefits?

I think improving home energy efficiency is more than just a good idea it is an absolute necessity bearing in mind the current, and pretty certain much higher future cost of energy. Not improving your home energy efficiency for whatever reason is going to prove to be an extremely expensive lifestyle choice in coming years.

But is the Green Deal the way to do it? Well I think not and my conclusion is based on my own simple advantages versus disadvantages analysis.

Advantages:
No upfront cost except for the assessment survey, £100 to £150.
That’s about it really for advantages.

Disadvantages:
For £100 to £150 you use to be able to get your loft or cavity walls insulated under the old scheme. Even for free if a pensioner or on benefits. Now you stump up the cash before any work is done and pay full price, two or three times as much.

You’re loaned the cash and charged about 7% interest levied on your electricity bill. For loft and cavity payback might be only three or four years but total cost will have increased from say £150 with instant savings on your bills to around £700 or £800 and you’ll see no energy bill benefit until the loan is repaid.

Get a new condensing boiler from an “approved supplier” and the bottom line looks even worse. Buy the British Gas boiler route for example and you’re already paying one of the highest prices. That already high price will be further inflated to cover the Green Deal bureaucracy cost and unlike older (admittedly slightly less efficient older boilers) the thing will probably only last you ten years.
Pay for it over ten years with all your efficiency savings servicing the loan (with interest) and you have saved nothing. And that’s assuming the (not guaranteed) “Golden Rule” where repayment never exceed the savings actually works.

You are unlikely to get 100% funding on more “involved improvements like solid wall insulation and double glazing so the no upfront cost principle flounders somewhat. And the proportion you do get with the Green Deal is at 7%, not the 2% or so you could get with a mortgage type loan.

The loan stays with the house if you move. The Government says this is an advantage? Don’t think so. Would you buy a house where you continue the payments for that new boiler? or would you insist it paid off first (or at least get a substantial price reduction), Me too.
Early loan repayment will mean the seller has to pay penalty charges to compensate the Green Deal lender for loss of interest.

Tenants will be paying to upgrade their landlords property. They might be warmer but they won’t have any money and the landlord laughs all the way to the bank.

My advice:
Definitely upgrade your home but go your own way to get there.
Use much much cheaper “Gas Safe” local plumbers for that new boiler, but only when your old one is beyond economic repair.

If you need to borrow get the money from a much cheaper lender.

If you’re a tenant press the landlord for improvements out of his or her pocket and/or rent a place which is more energy efficient in the first place. Actually look at the Energy Performance Certificate before signing up, that’s what it’s for.

If you think you might move don’t make you home harder to sell by saddling it with a Green Deal loan, they’re hard enough to sell already.

To conclude:
For the poor there is ECO much like the old scheme where improvements are free I’ve no issue with that except for the way it’s funded, which I believe is still from a levy on all our bills. I think the cash should come from the treasury, general tax money, raised generally on the basis of ability to pay it rather than a levy on some regardless of that ability to pay.

So that’s what I think about the Green Deal please feel free to agree or disagree.
But at the end of the day success or failure will depend on takeup rate, so we’ll see.

Member

I understand the Green Deal to be, installing energy efficient goods, and repaying the loan with the savings made. If this is really what is on offer then I cant see why people are not jumping on the band wagon, its a great way to start using less energy and it doesn’t cost any extra than you would have paid in the first place.

We insulated our first home in the late seventies, and were immediately enjoying the benefits, Double glazing had huge benefits, for sound and warmth. Since then we have brought and installed many gadgets to “get more for your money”.

We had Solar panels with the grant and the higher FIT, so we paid premium prices, though it is great to know even with 6 panels we are currently making more energy than we use some days.

After Double Gazing and Insulation our biggest energy savers are Solar and the installation of an Intelligent Heating Control, which I am disappointed to read, “Which” consider “beyond best practice” It provides a really comfortable living space using much less energy due to algorithms, constantly reading data inside and outside learning about your changing usage . Easily retrofitted, and the most cost effective purchase .
So why isn’t there a list of these type of control in Which magazine to find out costs and savings.

In yesteryear as an accepted way of life was “to pay on the never never”, we would buy a cooker from the gas or electricity Company, which took 5 yrs to pay off.
Why not pay for reducing our bills this way just look at what is more robust and maintenance free.

Member

Want a green deal? Fools rush in where wise men (and women) fear to tread! Their complexity parallels that of energy tariffs which has made me wonder if the same groups of people are involved in both industries. What we do know is that our politicians are just watching and therefore by default backing all this unnecessary complexity. The message seems to be “win by confusing people”.

Member
David, Oxon. says:
2 July 2013

For householders ‘of a certain age’ look at equity release to fund the up-front cost. Admittedly you’ll have interest (compound) accrueing on the advance but you don’t pay anything back by the month and you benefit financially immediately from the savings. The loan is redeemed from the re-sale value of the property when you downsize or die. The only downsides are 1, that interest is compounded, and 2, that you have slightly less capital balance if you sell to downsize, or there is slightly less for your beneficiaries when you die – and they can hardly begrudge you the savings that you will have made! In any case there is also the possibility of ‘value added’ to the property as a result of the improvements.

Member

I agree with the idea of making improvements so you’ll be comfortable in your old age but not financed that way. Interest on the green deal along with inflated prices of green deal providers will relieve you of too much of your money for sure. But you’ll also lose as much if not more by going for equity release so I don’t think there’s any real gain there.

Perhaps a solution is to downsize (or down value) and spend some of the released funds to make wherever you live more energy efficient, comfortable and with smaller bills. At least that way you get all the benefit of your equity value rather than giving a high proportion of it away in interest charges to either green deal financiers or equity release financiers.

To my mind borrowing is never a favoured option if you don’t have to, and if you live in a house bigger or more expensive than you need you don’t have to.

Member
David, Oxon. says:
4 July 2013

Chris,
I had a specific demographic in mind. Your excellent first article clearly sets out the pros and cons and I would disagree with little you said. Borrowing money is rarely a good idea. However for people in the last decade or two of their lives this is still a possible alternative funding method repayable only on death and the immediate financial benefit results in lower bills; for some this might be attractive. If the person down-sizes, then funds would become available. But if the person down-sizes to raise capital and then makes improvements the net value of the estate is diminished by the not inconsiderable costs incurred in moving. So the net gain or loss is difficult to quantify. Everyone has to decide individually. In any case moving just to downsize isn’t a practical option for all; many elderly people need to stay near to friends, neighbours and family for support.

For me the green deal is a non-starter. The house is relatively new and any further ‘improvements’ have an unrealistically long pay-back time. Five years ago my electricity was 25% higher and gas 50% higher than the last 12 months so I ‘ve reached the point of diminishing returns.

Member
Jim Kenney says:
8 July 2013

Green Deal? The loan and the high interest rates are real enough but the theoretical savings are intangible and immeasurable. You’d have to be bonkers to take out a GD loan on those terms.

Member

Im very surprised that “which”hasnt investigated the fact that people are finding it difficult to get home improvement measures installed by green deal installers.I paid £130 for a scottish gas assessment on my property and was advised to get double glazing and underfloor insulation.Then i phoned a provider who said that they would have no problem looking at finance for us but please could you find an installer who was green deal certified.I looked and i looked to find a green deal installer who would give us a quote and oh boy i couldnt find one.I used the official government “orb” site also .Nobody was interested.I phone up energy scotland who advised heeps but at that time didnt seem interested in getting involved in a debate about why in this case scottish gas are allegedly intentionally or unintentionally fleecing money of people for green deal assessments when they know at stage 3 installers dont do it but they still continue to allow it.When i phoned scottish gas the complaints department said that they only did assessments amd they were nothing to do with installers.But surely scottish gas for the 2 years they have been doing it must have done some research or feedback from clients who are in a similar situation.I said to him ok we will give you the bemefit of the doudbt you havent heard people cant get installations and you didnt know about it,but as from today ive told you will you stopmisselling your assessments at least in my area,while you investigate.The response i got was exactly this.”We will not investigate this matter as it is the government at fault and even though as from 2 days ago they are selling unrequired energy assessments they WILL continue to take people assessments fees off them and knowingly take theyre money with no quams.You surely have to investigate this “which”It is a MUST!!!

Member

Thanks for your comment, lynsteg, and we’re sorry to hear you’ve had problems with getting a green deal certified installer to put measures in – even after having gone to the expense of having your home assessed!

We’ve been doing some behind the scenes work on ensuring the Green Deal works better for consumers and the lack of matching-up between assessors and installers is certainly a concern. We’ll be sure to follow up this issue.