/ Home & Energy

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

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
Member

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?

Member

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.

Member
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.

Member

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.

Member

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.

Member

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.

Member

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.

Member

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?