1 October 2012 / Home & Energy

It’s the Green Deal’s maiden voyage – will it sink or swim?

Comments 16

At long last the government’s major energy efficiency policy, the Green Deal, launches today to very little fanfare. So why are we so cautious of the flagship Green Deal policy?

If you don’t already know what the Green Deal is – it’s a new scheme which provides you with the money up-front to install energy efficiency measures in your home. You then pay back the money over a period of time plus interest, and the money is collected via your energy bills.

However, the idea is that the measures you have installed will save you more money on your energy bills than the cost of the loan repayments – meaning you actually save some money. Or that’s the theory, at least.

It’s not easy being Green

Today’s Green Deal launch is only really a partial launch. If you want a Green Deal, you can have your house assessed as of today – but you won’t be able to access any finance under the Green Deal until January next 2013.

It’s important to point out that unlike many of the other energy efficiency schemes that have been and gone over the last few years, this is not a scheme of government grants. Although the Green Deal is backed by government standards, there is very little public money involved.

At Which? we’ve been clear about our reservations on the Green Deal. We think that savings estimates should be based on detailed energy usage data rather than just average figures, as this calculation will ultimately affect the size of loan you can get.

We want to see a ban on cross-selling of items on credit during a Green Deal visit, and we don’t want to see excessive early repayment fees. We also want to see Green Deal quotes that are in a clear and comparable format across all providers.

Keeping up the pressure

We’ve been pressing the government hard on these points and will continue to do so. On top of that, we’ll be carrying out our own investigations, including mystery shopping, to check that companies are sticking to the consumer protections the government have put in place.

Above all, we want to see a Green Deal that protects consumers from dodgy sales practices.

Being more energy efficient is a simple, low cost way of cutting your energy bills. However, evidence suggests it’s not a high priority for most people. Have you considered taking out a loan, or even the Green Deal itself, to make energy efficiency improvements to your home? Or are you feeling wary of the Green Deal?

Comments

john-from-halifax says:

1 October 2012

If I own a house, and take out a green loan to do it up to increase its value as I want to sell, does that then mean the purchaser of the property is the person who ends up paying the higher energy bills?

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Josh Green says:

1 October 2012

Hi John

The Green Deal does stay with the house, rather than moving with you. So if you took out a Green Deal for, say, some new insulation and a new boiler, you would have the work done and then if you were to sell the property (and the new purchaser was happy to take on the Green Deal on the property) the next owner would continue paying the bills. Of course, as I say above, the idea is that the bills wouldn’t actually be higher, but that is not a guarantee by any means.

Paula says:

2 October 2012

Do you know where I can arrange to get an assessment done? I understand that the assessment won’t cost me anything, but do I need to pay for this upfront and then wait until January to get the measures installed. I have tried searching on the internet but I can’t find any practical information on how to arrange for an assessment.

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Josh Green says:

4 October 2012

Paula – its not easy at present to identify companies offering Green Deal assessments. You could try looking at the website for the Green Deal Oversight and Registration Body (http://www.greendealorb.co.uk/) which includes a list of the registered providers and assessors (currently two and seven companies long respectively – so not a huge choice right now!). And the assessment may not be free, you should watch out for that, make sure you establish at the outset what your cost liabilities for the assessment are likely to be.

Chris, Gloucester says:

2 October 2012

I’m all for becoming more energy efficient, as I’m sure are most people. Energy costs seem to be spiralling upwards at an alarming rate, and as this happens people will be focusing more and more on becoming more energy efficient.
However is the Green Deal really a good vehicle to achieve higher energy efficiency in our homes? I have several serious doubts. I’ve looked at what is on offer and I don’t expect the Green Deal in it’s current form to succeed anything like as well as is hoped.
Why?
Well lets look at a few examples.
Up until now loft and cavity wall insulation has been subsidised and very cheap, or even free, and the energy bill savings have been immediate. Insulation has always been “the biggest bang for your buck” when it comes to efficiency improvement. With the Green Deal OK you pay nothing upfront but you won’t see any immediate energy bill savings either. Those savings will go towards paying full price for the insulation, and you’ll pay interest of I think 7.5%. It might well take a few years to repay the loan and without that immediate incentive loft and cavity installations are going to plummet.
How is that a step forward?

The “golden rule” says that repayments won’t exceed energy bill savings (not guaranteed) so the improvements won’t see you paying out more? Well let’s say you replace your older boiler with a new singing and dancing 90% efficient condenser. Green deal installers you can bet won’t be the cheapest and remember that 7.5% interest. Ok no upfront payment but also remember modern condensing boilers are complex, more to go wrong and are unlikely to have a working life much longer than ten or twelve years. It could well be that by the time you’ve paid off the loan you’ll need another new boiler. Result is no overall saving, no incentive to do it in the first place.
How is that a step forward?

The Green Deal loan stays with the property if you move. So you’re thinking of buying a house and you find there is a Green deal loan attached to it. You’re faced with higher energy costs because you’ll have to carry on the repayments on that new boiler or whatever. Would you accept that or would you insist the Green Deal loan is paid off first? Me too.
The seller is then not only faced with the repayment but also a redemption charge. Buying and selling is hard enough already.
How is that a step forward?

To be fair there probably are occasions where the Green Deal just might work. Perhaps where you’re intending to stay in the same property for a long time. Where the property perhaps needs very expensive solid wall insulation, but even then I doubt the golden rule would work out. Then the Green Deal just becomes a different method of financing, but even then there are probably cheaper financing options, and certainly I would think cheaper non green deal installers.

So. I foresee problems with the Green Deal, and I’ve not even mentioned the fact it’s all happening through self regulating private enterprise, a recipe for miss-selling if there ever was one.

I’d rather see a system of Government subsidy for efficiency improvements, perhaps with the added incentive of reduced council tax for more efficient homes. All paid for with small additional tax on all energy bills or by using the VAT money charged on energy. Now some will argue that paying more to subsidise someone elses improvement is unfair but It’s the only way I can really see it actually happening.

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Dave says:

2 October 2012

The issue regarding re-sale of a property with a Green Deal loan attached to it comes up a lot, however if it were my house and I was asked to pay off the loan before a sale was to proceed I would say “sure, but the price has gone up by £x thousand”. As soon as the loan is paid off, that house has to be more valuable, no? When faced with the option of paying a higher asking price, many purchasers may prefer to keep the green deal charge, as they may not be able to raise the extra capital.

Chris, Gloucester says:

2 October 2012

Dave,
Of course there is another way of looking at it.
A buyer might not agree to the asking price if a Green Deal loan remains in place, and might conclude that either the Green Deal is paid off or, if it stays, the price reduces to compensate for the ongoing payments. If the buyer and seller cannot agree or compromise the end result might simply be no sale.
It really depends how you look at things.
Are you buying a house with a new efficient condensing boiler or are you buying a house, and the forced option to continue buying that boiler through continued ongoing payments?
Don’t know which way you’d you look at it but I think if I were the buyer I’d prefer to start “clean”.

For rentals this issue might prove to be even more emotive for new tenants who might well be unwilling to pay off a loan taken out by the landlord or a previous tenant.

Josh Green says:

4 October 2012

Chris & Dave

Thanks for your comments – all really interesting stuff. I share many of the concerns that Chris airs here and I can see that the Green Deal charge is going to be an issue when selling a house. However as you say if its a long term arrangement on a substantial Green Deal loan the balance plus a possible early repayment fee could amount to thousands of pounds in some cases. You also make a very good point about it potentially being a net-zero gain for the householder, and why would you bother with the fuss of doing the repayments if that’s to be the case? I suppose you could argue that energy prices are likely to rise in the future which may offset this risk, but are people going to factor that in?

Chris, Gloucester says:

6 October 2012

Josh,
I’m glad someone else can see the short comings of this Green Deal initiative.
I think the whole basis of this Government “flagship energy efficiency policy” is that no Government/Treasury money goes into it. They seem to think, and are proud of the notion, that they are going to get closer to the Co2 reduction targets they (the Government, this one or the last) signed up to without it costing them (Government and Treasury) anything. They believe they are creating a free market solution and it will all come good for them.
Worse of all is when it doesn’t work it won’t be Governments fault it will be the consumer who is blaimed because the vehicle was there to become more efficient but the options wern’t taken up. The fact that the economics didn’t really work out and as many problems were created as were supposed to be addressed won’t come into it.
I stick to my argument that to get everyone onboard with the idea of becoming more energy efficient there has to be an immediately realisable incentive, and that can only be achieved through subsidy paid for by us all indirectly through tax coming from somewhere else. 100% private money and private enterprise operation of the scheme won’t do it. The Green Deal in it’s current form is fundamentally flawed because the objective of private enterprise and the overall Co2 reduction objective does not really totally coinside. But of course that is a political argument and perhaps more suited to another conversation.
In the months to come as the “flagship policy” slides down the slipway we’ll see if my point of view proves to be correct or not won’t we?

John, Folkestone says:

11 October 2012

I, too, have misgivings about the green deal. First, there may be some element of misrepresentation about the ‘golden rule’, which is intended to reassure householders that they will not borrow more to install measures than is covered by the savings resulting from them. However, there will be interest on these loans. If that interest is not covered by the savings then householders will pay back considerably more than they borrow. That should be stated clearly and the total cost of the loan to the householder should be set out prominently in any green deal package.
Second, the ‘impartiality’ of the assessor/assessment is a bit suspect. Making a document setting out measures to improve the energy efficiency of a house a formal prerequisite not only to selling it but also to securing a green deal loan or receiving the domestic RHI for it, then arranging for that document to be provided by salesmen whose livelihood depends on selling said measures hardly seems a recipe for impartiality True, the salesmen will be trained to use two software packages, which are presumably independent of the commercial interests of the salesmen, but the assessments produced by the impartial software packages are still subject to the information that the partial salesman enters into them. Who will check to see that all the relevant information is correctly entered? And is there any possibility that outputs can be selected, so that some assessments are ignored or dismissed if not suppressed?
Third, how will householders be able to judge what package of measures is the best value for money in their particular circumstances? I understand that some forty plus measures are covered by the green deal. Is every assessment going to give an estimate for the savings achieved for every one of these measures not already in place? Is the software sophisticated enough to calculate the effects of including or excluding any one or combination of measures? Would it even be able to do something as simple as, for example, compare the savings of 1) modernising an old oil boiler, 2) installing a heat pump instead, or 3) doing both in a bivalent system?
If the government really is serious about encouraging householders to invest in energy efficiency measures, whether by interest on green deal loans alone or interest plus payment of upfront costs that are not covered by savings, then they need to ensure that green deal procedures are clear and unequivocal about costs to householders. They need also to ensure that there is no uncertainty about the impartiality of assessors/assessments, and the best way to do this is to keep assessment independent of sale. If assessors are independent of providers and installers, then there is scope for them to become expert advisers helping householders to determine what combination of measures gives them the best value for their money, something along the lines of independent financial advisers. For this to happen, assessors need to receive a proper professional fee that rewards them for their time, expertise, objectivity and effort on behalf of the householder. Unfortunately, that fee will seem out of reach and unjustified to most householders, so some way must be found to subsidize it. If the government is unwilling to fork out, it should be able to come up with ways to make those with the greatest interest in seeing this market develop, the green deal providers and installers, provide the subsidy. Otherwise, in the present economic climate I cannot see any significant uptake of the green deal by householders.

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Chris, Gloucester says:

13 October 2012

John, Folkestone,
I agree with much of your comment.
Especially the danger to impartiality or independance of the assessor within a scheme operated through private enterprise. (They will incidently be called Green Deal Advisors, GDA’s)
The GDA was never supposed to be a salesperson but if they find themselves in any way tied to the actual installer, a Green Deal provider (GDP) there is a serious danger that they will end up forced to become sales people, or face having no income.
There is, in these times of financial constraint, a real possibility that GDP’s will operate a sales approach whereby the GDA only receives a fee upon conclusion of an order for an efficiency measure installation through the Green Deal. Yes there will be checks and measures, there will be regulation (private enterprise self regulation?) but a very real danger of miss-selling under these circumstances will I strongly believe remain.
Even if a tied GDA sales model is not used by a GDP the GDA may well face a situation whereby they are only commissioned if they have a track record of efficiency measure installations from their previous surveys.

I am already a Domestic Energy Assessor (DEA) providing Energy Performance Certificates for property sales and rentals. I operate with complete impartiality and independance within the rules of my accreditation scheme. The nearest I come to the kind of pressure that I think there is a danger of GDA’s experiencing is in the case of Feed in Tariff qualification for people having Solar PV installed (a property energy performance rating of “D” or above required). I’ve had no problems so far because in my experience only a tiny minority of property owners wanting solar tend to live in a place which achieves less than a “D” rating, but I do wonder if the limited amount of work I get in this area would continue with any particular installer if a series of less favourable property ratings were to come about.

It is from the ranks of DEA’s that most GDA’s will come. I’m already being bombarded with offers to undergo the extra training required to add a GDA qualification. Costs (to me) would be around £1000 plus 20% VAT.
So it pretty clear where the money is to be made as the Green Deal scheme starts.
Now it’s hard enough making even a very modest living as a DEA. Too many people qualified, the housing market is relatively stagnant and the fee per commission has been forced ever lower.
So It’s not surprising that before lashing out more money us DEA’s will want to be pretty confident the Green Deal is going to actually be a success.
The current Energy Performance Certificates I produce carry Green Deal information so I’m already in a unique position to discuss Green Deal potential with the kind of people who might be expected go for it. My experience is that the reception to what is essentially an alternative financing method for energy efficiency improvement ranges from “lukewarm” to “a strong suspicion that someone is going to try to rip them off”.
Needless to say I’m not at all convinced at this time that any extra “investment” in training would be money well spent.
So, from what I know of the Green Deal Scheme “today” I’m sceptical. I think the whole idea needs a very careful review. I think leaving it to private enterprise is a serious mistake. But I’m trying to keep an open mind and to this end I’m off to a one day workshop next month to get a much better handle on all the detail.
I’d like us all to be more energy efficient, I’d like us all to spend less on energy bills, I’d also like to see a fair deal for all without miss-selling and/or profiteering.
If the opportunity arises to report back through a future “which conversation” I will.

Andy C says:

22 October 2012

Chris,

I agree with your opinion on the Green Deal Advisor and I’m trained to be one. I have heard all sorts of talk of us having to pay £1,500 per year to an accredited body to optain the trust mark but still to this date do not know how I could ever make a living from this unless I allign myself with a provider who is likely to want me to sell their products which would make it very difficult for me to sell myself as impartial. The goverment has stated that they would like the green deal advice reports to be completed FOC but I don’t know any self employed individual who can afford to offer his/her time and services for free on the off chance of a large provider who’s payment terms are 60 days from date of invoice paying them if the report converts into an order.

I think the government can protect the consumer by setting a fixed rate for an EPC and GDAR that can be funded by the govermnet using treasury money (putting their money where their mouth is) this will ensure grren deal advisors are paid providing they hold the relivant skills/accreditiation. If the consumer once they have recieved their impartial advice decide to take out a green deal package their chosen provider will pay the goverment for the GDAR and the only risk the treasury then has is on the properties where a GDAR has been produced and no plan is taken out. This will help to keep the providers / assesors seperate and reduce the chance of mis-selling occuring

Andy C says:

22 October 2012

Also in response to John’s original question of how to have a report completed. I too have scoured the internet in search of a an organisations who are offering green deal reports and all that I have found so far is websites that try and capture your data ready for sale to the highest lead purchaser. This whole initiative was supposed to support local SME’s but from what I can see we are going to see the closed shop situaution experienced with the warm front scheme which saw customers having to use install companies imposed on them by the scheme provider rather than their chosen installer only to find that the quality wasn’t there.

warren says:

28 October 2012

hi when do i get a reply to registering for the green deal as i have recieved nothing yet and i registered months ago ?

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Edward says:

29 October 2012

Hi Warren,
The green deal, although officially launched isn’t operational. The government hasn’t released all the necessary software for assessments to be carried out. I have tried to get an assessment and none of the approved assessors could do one right away. Therefore I wouldn’t hold your breath as the software issue is just the start of the GD’s problems. I have a blog on the various flaws in the system here (http://hoa.org.uk/2012/10/the-green-deal-a-good-idea-riddled-flaws/). This is not to say that the GD won’t work but there are a number of serious hurdles t overcome.

My advice would be to register your details with a few assessors and get quotes from them when they become operational (probably in January). Otherwise Dr Paula Owen (an energy and climate consultant) has written an excellent blog examining how the GD will work (http://hoa.org.uk/2012/10/2278/)

Michael says:

11 January 2013

HELMSUK.CO.UK (Home Energy Lifestyle Management Systems) based in Glasgow in conjunction with Barclays Bank, are offering a green deal on solar panel and other energy saving aspects (Electricity Voltage Reduction device etc) They ‘insist’ that the golden rule applies and that everything can be removed and installed in your new property at a small charger (I was quoted £200). It sounds too good to be true but we know the rest of that saying. Have you heard of this deal

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