Imagine that I’m the government. I’m going to make you an offer – it’s not earth-shattering, but I think you might like it. It’s called the Green Deal and it involves making your home more energy efficient – will you buy in?
The deal goes like this. I’m going to organise someone to come to your home, perform an assessment and then recommend the right energy efficiency measures for your circumstances.
Next, I’ll find someone to finance these measures and then someone else to provide and install them.
So far so good. Now I’ll arrange it so that over time you pay back the money for these improvements through your energy bill. But – and this is the clever bit – you’ll never be expected to pay back more a month than you end up saving on your bill from using less energy. Thus, it’s pay-as-you-save approach.
Lower energy bills
Are you interested? The government hopes so, because this is its flagship energy scheme which aims to propel the country towards reaching its carbon emission reduction targets.
At present, we use more energy heating our homes in the UK per household than the considerably colder Sweden. Overall, this amounts to 33% of our carbon emissions. Reducing this would be a sizeable step towards a lower carbon economy.
Even if reducing carbon emissions isn’t your main priority, saving money on your energy bill probably is – and this is where the Green Deal could work for you.
Even though you eventually pay the money back, the expected savings throughout the lifetime of the improvement is meant to considerably exceed the cost. And that means lower energy bills overall.
So where’s the catch?
It depends on how you look at it. The money financing the deal is effectively a loan, which means that you’ll be required to pay interest. Therefore what would otherwise be a one-off payment of £500 for cavity wall insulation could result in an eight year pay-back period costing you up to £120 extra.
On top of this, while the government hopes that the pay-as-you-save approach (or as they call it the ‘Golden Rule’) will work, there’s no guarantee.
It’s a complicated process with up to five different parties: the assessor, provider, financer, installer and you. If something goes wrong it may be difficult to work out who is at fault.
Would you consider the extra interest a price worth paying or would you rather pay up-front? What reassurances would you want in case something went wrong?