Yesterday the government unveiled the details of its flagship energy efficiency initiative, the Green Deal. Sadly, its crucial ‘golden rule’ means that joining the scheme may not work out to be such a good deal after all.
The idea behind the Green Deal is that people take out a long-term financial agreement to pay for energy-saving improvements in your home. This loan will be attached to the property, not the individual, and you’ll repay it, with interest, over many years.
In theory, under a ‘golden rule’ the repayments must be less than the savings on the energy bill. But yesterday’s announcements proposed that the basis for how much a consumer should pay back will be based on average figures rather than figures tailored to their own energy usage.
This means that many customers could potentially be paying back far more than they are saving on their energy bills.
Barriers to energy saving
Cost isn’t the only barrier to taking up energy saving measures. There are lots of free and subsidised insulation offers out there right now, and yet energy suppliers struggle to get people to take them up. People are often put off by the ‘hassle factor’, such as clearing the loft before insulating it.
Add to this the fact that only a quarter of us think energy companies are trustworthy and it’s hard to imagine customers flocking to make their homes energy efficient via the Green Deal.
What will make the Green Deal a success?
First, people need to be confident that it makes good financial sense. The so-called golden rule has to be tailored to each person’s property and their own energy usage – and must not be an ‘average household’ figure.
If the golden rule is calculated in a generic way, then whether you live in a big detached house or a small terrace, it will be meaningless. And if the interest rate is too high or the repayment system is too complex, then people are not going to sign up.
Next, when the benefits of the Green Deal are communicated – it must be in simple, easy to understand language. There must be no misleading talk of ‘free insulation’ or incentives to take up the deal, which are nothing of the kind. Yes, consumers won’t have to pay upfront costs, but over time they will have to repay the costs of the Green Deal in full, with interest.
Finally, people tell Which? that they prefer energy efficiency advice to be independent of the companies selling them the measures. The package of measures recommended by companies must be something that the consumer can trust is going to be the best deal for them. And we need robust monitoring and reporting about the impact of the Green Deal on energy bills.
Despite the information in yesterday’s ‘Annual Energy Statement’ from Chris Huhne, there is not sufficient transparency about the amount of money government policies add to our bills.
Which? wants the Green Deal to be a success. But unless people are offered a good deal that is easy to understand by a company that they can trust, not enough will sign up. The government’s aspirations for the Green Deal are admirably high. Now it must show that its proposals will deliver for consumers.