/ Home & Energy

The Green Deal – will it save you money (as well as energy)?

Visual of two green hands shaking

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?

Comments
Guest
Mark Smith says:
7 March 2011

I wonder how that ‘you’ll never be expected to pay back more a month than you end up saving on your bill from using less energy.’ statement works – how would it be calculated? A couple of really warm, or really cold winters could give a false energy reduction calculation. Would you end up paying over the odds on the loan during the warm winters and vice versa on the cold ones? That might well even out your energy bills, but if there’s a long period of cold winters, may this mean the loan is not paid off in time, leading to more interest payments.

Profile photo of dave d
Guest

Bitter and repeated experience suggests to me that ANY (or maybe that should be ALL) government schemes, irrespective of the political colour of the conceiving government, are rip-offs which invariably result in only over-charging cowboy companies being eligible to supply (and fit) poor quality and / or outdated products.

Examples include the Laptops for Teachers scheme and the Boiler Scrappage Scheme.

Therefore I shall have no part in this scheme and will protest most strongly if there is any attempt to force everyone to be involved (such as in the energy saving light bulb scheme).

I’m delighted to do all I can to make my home energy efficient, but I’ll do it using quality products fitted by quality tradesmen whom I trust and I’ll pay for the materials and work outright when I can afford each item, not on the never-never.

“disillusioned of Sheffield”!

Profile photo of Jenny Driscoll
Guest

You certainly have had bad experiences from the sound of it! Our research has raised problems where people have been caught out by companies over charging and making exaggerated claims on energy efficiency products. But people should also take advantage of schemes – especially as we are paying for some of them via our gas and electricity bills! Like any other work in your home, be on your guard and check out the company first (even if they are energy companies!). Don’t sign up to anything on the day and try to get a recommendation. Which? members can use the Which? Local (www.which-local.co.uk). Yes, don’t get stung, but don’t lose out either….

Guest
Penny H says:
13 March 2011

To put the other side, last year my husband and I had our loft fully insulated under a government scheme and had to pay nothing, and also replaced our boiler under the scrappage scheme with no bother at all. In both cases we were very skeptical and expected to have to use a company that would add pounds to the bill, but this didn’t happen.

Guest
Mick fletcher says:
13 February 2013

Before commenting on subjects you clearly know nothing about I would do a little research first.
I run a company that is about to become GreenDeal accredited and I can assure you there is nothing ‘cowboy’ about the companies who carry out work under the green deal , bearing in mind it costs around £20000 to get qualified for the various aspects of the work we wish to undertake, we have subscribe to several new governing bodies , up our insurance to £ 15 million , under go work inspections every month, comply to PAS 2030 , and if we one single complaint we are the register ! Sadly the morons from the press don’t show the green deal in a good light,or explain its value.
You don’t have to borrow the full amount on the green deal, you could self finance the job upto 99% of the order value and then use the green deal finance for the remaining 1% , the beauty of this is that you get all the benefits of the scheme , for instance buy a boiler without greendeal , and you will get an average 3-5 year guarantee backed by the fly by night plumber , buy a boiler through green deal and you will get the 10 year minimum full guarantee backed by the likes of plumb center .
Other benefits include : no credit checks for finance , so someone with a chequered history would usually get punished by crippling interest rates, the green deal finance is secured to the electricity meter. Most high street banks will lend you money at 5 – 5.5% so green deal at 7.8% unsecured is not a bad deal, for sure you could finance it yourself, but if you we’re not expecting to live at the current address for the next 10 years then what’s the point ,because you will never recoup your investment . For further information on Green Deal check out http://www.decc.gov.uk or http://www.energysavingstrust.co.uk

Guest
Mark Smith says:
7 March 2011

Well, I have to say my house is pretty toasty after loft and cavity wall insulation was installed with a government grant.

There are many private businessmen out there who would rip you off, at least the government is accountable – up to a point – and can be voted away. I know that a lot of people have benefited from free boilers, free insulation, free light bulbs and more. And many of those in vulnerable positions.

Mind you, we could probably do with a few more votes for The Green Party to make a difference.

Guest
Matthew G says:
8 March 2011

Mark Smith highlights the problem.
The Government grants have been used previously in an attempt to reduce energy consumption, but installing insulation alone just makes the house warmer. You need to make sure the heating controls stop the house from getting warmer than you need. Heating is almost 60% of your domestic energy use (DECC figures), so fix that first.
There only three ways to reduce energy consumption:
1 Reduce waste (prevent heating unused parts of the house, stop draughts, heat leaks)
2 Reduce demand (prevent overheating)
3 Increase efficiency (use fuel more sparingly, control the boiler better, or control a better boiler better)
Minimise your energy demand.
Make sure your whole house is efficient, not just a part of it.
If we all minimise our heating energy demand, that will have a huge impact on the UK energy demand (heating and hot water in homes represent a quarter of the total UK demand!)

For Green Deal to be effective, make sure you fix what is already installed in your home BEFORE investing in something new. Then it will have more chance of working, more chance of paying back.

Guest
Mark Smith says:
8 March 2011

@ Matthew G
I wasn’t highlighting a problem Matthew. I may not have made it clear, but one can have the same comfort levels in ones property, whilst reducing the amount of energy needed to maintain them, with the use of effective insulation.

Profile photo of Drew Ritchie
Guest

Mark and Matthew raise important issues.

In response to Mark:
– the Government has yet to clarify how the pay-as-you-save approach will work in practice. With regard to your point – one possibility is that an estimation of your current energy use in a typical year will be conducted together with an estimation of the savings you are due to make in that year as a result of the energy efficiency improvements. Your monthly repayments will then subsequently be capped at a level which do not exceed these expected savings. You’re quite right, by looking at a particularly warm year in isolation it may be the case that the rule is not achieved. The idea of the ‘Golden Rule’ is after all only notional, and not guaranteed. However, over the whole lifetime of the product the Golden Rule is much more likely to be satisfied – even if this does take a long time and incur a lot of interest on the way.

In response to Matthew:
– this is an interesting aspect of this scheme that does provide some cause for concern. The phenomena you are describing is called the Jevons Paradox and will definitely ring true for a lot of households. I know when my mother got a new boiler she was celebrating how much warmer the house was.

For these reasons, we would like to see the advice you get from Green Deal assessors and providers include the very things you mentioned. For example, advice on managing your boiler and keeping control of your energy demand. Also, keep an eye out for the Renewable Heat Incentive, another Government scheme aimed at decarbonising our energy heating needs through a feed-in-tariff type scheme.

Guest
Energy Saving Trust says:
8 March 2011

Hi, you’ve raised some really interesting questions here. Clearly the scheme will have its limitations, and we are all still waiting to see what the detail is going to look like in practice. It seems clear that impartial advice, robust standards and enforcement are all going to be key to Green Deal’s success, and there is going to have to be a lot of good communication with the public to help people appreciate the benefits – not just a lower bill (with savings in any case going to pay for the work), but a cosy, draught-free house, and that little warm glow of saving carbon too…

As we keep saying, if we are going to meet the government target of reducing carbon emissions by 80% in 2050, we need to giving more than 13,000 homes a green refurbishment every week – starting yesterday. So the Green Deal is partly about making that happen, and of course at the Energy Saving Trust we want to help enable as many refurbs as possible.

Even under the Green Deal, people can pay to install measures themselves if they prefer, or are able. And for smaller measures like loft or cavity walls insulation they might. Or they might not. Which is why Green Deal is potentially so exciting – it gets over two of the biggest barriers to people taking action: the upfront capital cost and the hassle factor. But assurance for customers is essential, and much of the work we’re doing at the moment is about ensuring that that’s in place.

Guest
Mark Smith says:
8 March 2011

Sounds good to me. I hope I can be a part of it too.

Guest
Jacqui says:
8 March 2011

I’m just wondering what happens if you sell your house before paying off the loan? Would the debt transfer to the buyer or would you be expected to pay it off in a lump sum at that stage?

Guest
Energy Saving Trust says:
8 March 2011

Jacqui, the idea so far is that the loan is attached to the house… there’s a discussion of this on our blog – our Head of Low-Carbon Technologies wrote a fascinating series called Me and My Clever Home, all about how the technologies might have to start working together if we’re to meet the carbon reduction target. This rather long URL gives all the posts in backwards date order – look at the second one down, about money.

http://en.search.wordpress.com/?q=site%3Aenergysavingtrust.wordpress.com+%22clever+home%22&s=date&t=post

Profile photo of ChrisGloucester
Guest

Like most Government initiatives there will be a hidden agenda and the final cost will not be as it first appears.
Currently anyone can get their lofts and wall cavities insulated for around £150 each under the existing grant structure. Those over 70 or on qualifying benefits get it free.
So all the people who take what is already on offer see all the benefits immediately of the resulting reduced energy cost and then every year into the future.
Go for the “Green Deal” loan and yes ok your energy bill won’t go up, but it won’t go down either until you’ve paid back the loan amount and interest. This repayment could take a long time and the longer it takes the more interest you’ll end up paying, and of course you pay the full amount back, no grant.
For things like loft and cavity where a grant structure already exists this “Green Deal” doen’t sound very good to me.
For bigger stuff like solid wall insulation or new boilers maybe it will work, not sure, but all in all I like the idea of immediate savings which you’ll get with a grant structure and no prospect of accruing interest.

But it’s a Government initiative so it will not be fully thought through. Like the car scrappage scheme, scrap cars had to have a current MOT, so a safe roadworthy car was scrapped in favour of a new one? How did that improve the carbon footprint?
Like the boiler scrappage scheme old boilers had to be replaced by an “approved installer” at an approved installer price, which even with the scrappage grant was higher than any independant “gas safe” plumber could do it for.
Beware of ideas coming from politically motivated Government “think tanks”.

Guest
Penny H says:
13 March 2011

“Like the boiler scrappage scheme old boilers had to be replaced by an “approved installer” at an approved installer price, which even with the scrappage grant was higher than any independant “gas safe” plumber could do it for.”

This is what I was worried about when we investigated the scheme last year, but in fact we went to reputable independent plumbers as well as larger companies, and the prices did not differ greatly. As my husband put in our last system, (and had done others in the past), he had a good idea of what things should cost, and it was much reduced thanks to the boiler scrappage scheme. Eventually we chose British Gas and were very satisfied.

Guest
Mark Smith says:
11 March 2011

I have to disagree with Chris somewhat. With energy prices likely to be shooting up even further than they have recently, in a few short years, what you would have paid for energy had it been bought from the utility companies would be offsetting – and perhaps exceeding – the loan and interest repayments.

Are you taking into account that once paid off, then it would actually be generating income, perhaps at a time that someone is going into retirement and a bit extra in the pocket would be handy?

In addition, the property price would rise once solar is installed. Seems pretty win-win to me.

There’s more information to be found at http://www.government-grants.co.uk should you need it.

Profile photo of ChrisGloucester
Guest

Mark,
No one is saying don’t do these energy saving things, and yes as energy prices continue to increase the benefits will also increase.
But if all this happens through grant support rather than through repayment of capital and interest that little extra in retirement will be even greater.

It could be argued that the “Green Deal” removes Government expense and loads more on to the individual, and also benefits whoever provides the loan.
Grants spread the burden much more faily and benefit the most those who need it the most.

As for your ideas on property value, I admire your optimism.

Profile photo of richard
Guest

Can I as an OAP get a retrospective grant for the insulation I installed years ago to save money?

Profile photo of Jenny Driscoll
Guest

Hello Richard
We are working on finding out the answer to this and will post as soon as we get the information.

Guest
Mark Smith says:
13 March 2011

I don’t believe grants are retrospective Richard. The insulation would have had to have been installed by an accredited installer also, to qualify you for the grant.

Chris – the grants only covered about 10% if that, for solar etc. If things work out, you can get cheaper (non existent?) energy bills and double your investment over time.

Profile photo of ChrisGloucester
Guest

Mark,
Yes it’s a 10% incentive for solar PV installation, but still a hefty wack to find for the rest.
you say “if things work out” “you can double your investment over time”. You’ve had the saleman round haven’t you?
If you can stump up the 90% and pay outright I think you might turn a modest profit over the life of the installation, if it lasts it’s predicted life that is. As for doubling you money, don’t think so, and if you borrow to fund this installation (including a “Green Deal” loan) I think when you factor in interest you will run a considerable risk of ending the exercise with an overall loss.
But more to my point, remember any profit you might make will come at the expense of all the other electricity bill payers through the feed in tariff surcharge we’ll all pay (are paying), including the poor who could never afford to get in on these profits (if there are any). I don’t see how providing profit for you that way is fair. Not very “we’re all in it together” is it?
I’ll stick to my original view; big business and public buildings first, bigger grants so we can all benefit when the economies of scale bring the price down, no unfair feed in tariff financed at least in part by those who really cannot afford to, no “Green Deal” accruing interest and lets manufacture the things in the UK so we get a few jobs out of it too.
Still if you want to go for it good luck, hope it stays sunny for you.
I’ll carry on hoping for an approach which gives everyone more of a fair chance.

Profile photo of Drew Ritchie
Guest

Great discussion! – It’s a complicated business this new low carbon future.

As far as Feed-in-Tariffs go, although the Government has not ruled out including such technologies in the Green Deal there are no plans to introduce them as of yet. It’s certainly difficult to see how the two schemes would interact in a workable way and it may well be the case that they will remain completely separate. What we could like to see is that – when a Green Deal assessor comes to assess your property – you are provided with a range of possible options that sit both within and outside the Green Deal finance mechanism. For example, if your house sits on the south coast then you should be made aware that the FIT scheme may be a better investment for you than a new boiler, even Green Deal financing doesn’t cover it. This idea of a holistic, objective and comprehensive assessment of your property should be ingrained as part of the Green Deal scheme. However, at present, there is a danger of a conflict of interest between suppliers and assessors (who will often come from the same company) meaning that the recommendation you are given may not always be in your best interests. Which? is actively engaging with the legislative process in order to ensure this is prevented.

Chris – I take your point about FIT not necessarily being fair fro those who can not afford the money up-front. Is there however a case that reducing carbon emission is in all our long-term benefits and this can actually be done most efficiently through individuals’ private capital rather than state funding? What about the idea of ‘rent-a-roof’? – do you think this is a viable alternative for many people?

Profile photo of Drew Ritchie
Guest
Guest
Mark Smith says:
14 March 2011

Hi Drew,

I’m not so sure about ‘rent-a-roof’. It sounds attractive for sure, but there must be a lot of profit in it for the installers if they’re willing to give it away ‘free’ up front. This is why I disagree with Chris of course.

I’m not sure if Chris and I are debating a cross purposes. But to be sure, when else in history has there been a scheme in which the government paid you for what you made and then used yourself? I’m talking about domestic issues rather than the old farm subsidies etc.

I agree that it’s unfair on the poor, but that won’t stop those that can afford it doing it I’m afraid, especially if they can see savings and gainings opportunities. How do people with money make it in the first place in general? By being careful with what they already have/spend it on, at least in part, I’m sure.

If I had a south facing roof, if I was pretty certain of earning money later in life and thought that I would not be paying out more every month whilst paying off the loan, along with reducing carbon emissions, I would jump at it. It’s a long term investment of course. Legislation regarding the miss selling of schemes like this might put people’s minds at rest of course.

What might stop me is installing today’s solar PV technology, running at 12-13% efficiency I believe, with much higher efficiency products maybe just round the corner. But science is struggling with that issue it seems.

Guest
MJ says:
13 July 2011

I believe the whole green deal scheme could be flawed if the initial site assessments are undertaken by green deal advisors working for green deal companies, many may be paid a low commisison based basic wage that has to be topped up with commission payments based on product shifting, therefore a biased and vested or manipulated survey may be given undermining the integrity of the whole scheme, one soloution is for green deal advisors to be made totally independent and impartial and not to be allowed to work for green deal companies, perhaps an upront fee could be paid to the advisor by the green deal recipient that may be claimed back from the green deal company that wins the order.

Profile photo of ChrisGloucester
Guest

MJ,
I agree completely.
But a system or mechanism already exists for completely independant objective assessment to be carried out, that being the Energy Performance Certification required by law if a house is being sold or let.
I am an Energy Assessor, self employed and completly independant and objective. I am not permitted to sell any energy efficiency measures or therefore collect any commision. I just receive a fee for my independant assessment.
If this EPC system, carried out by independant self employed assessors, is made the starting point for any “green deal” arrangement there would be no bias, vested interest, or manipulation of the survey because there would be no commission payments, only the survey fee.
It could be that the standard EPC survey needs to be changed very slightly to incorporate “green deal” criteria a little better but that would not be very difficult and would give existing assessors no technical problems.
So a solution to your concern exists. All we have to do now is get the the legislators to listen.
A job for “Which” perhaps?

Guest
Rickie Dickson says:
24 August 2011

I think at least Green Deal will give consumers more options than they previously had. If they have the money sitting in their pockets and can afford to pay in full for any of the improvements, then fine a customer will probably get a great deal from any quotes that they recieve. However, if you are a pensioner living in a house worth loads of money but you are still cash poor and you can’t get credit or dont have the cash to replace an old knackered boiler then Green Deal sounds like at absolute God send. I’ve come across many people in this situation in my line of work.

Guest

I had my loft insulated with the help of a scheme. It is a big loft and I was told that the company using the grant could only do a certain amount, I then had to fund the remainder. I was ok with this until they told me how much it would cost.

I cannot remember the exact figures but I will try and show what they charged.

I had a full grant and they could insulate 95% of my house. There was a remainder of 5%. The figures for the 95% that they were doing under the grant cost approx £500. The remaining 5% they wanted £460. The said they charged their normal rates for this bit and the other bit was subsidised.

I could not get it done. As far as I am aware this was my only pitfall in the scheme. That should you need more then the allotted space the grant covers it works out to be too expensive.

I declined them doing the last 5% and done it myself for £35

Guest
Rachel says:
25 November 2011

It just seems all too uncertain and complicated to me. Why not just offer low rate loans for specific measures.

Guest
Micheal Meech says:
25 November 2011

I am a Domestic Energy Assessor engaged in producing Energy Performance Certificates (EPCs), which are to be the starting point for a ‘Green Deal’ application. I was at a meeting last week when we were addressed by a government spokesman (from DECC). He proudly announced that the Government were to put no money into the Green Deal but were creating a ‘market’. The problem is that this market is to be heavily biased in favour of the large concerns like B&Q, British Gas, etc who are certain to become ‘Green Deal Providers’. They are to be allowed to directly employ the energy assessors who will make the calculations of potential energy savings for a property, surely compromising their independence.

Until a householder has commisioned an EPC from a provider he will not know what improvements and savings can be made to his home, but he will then not be in a position to get competitive quotes for the work without financial penalty.

Profile photo of ChrisGloucester
Guest

Micheal Meech,
I too am an energy assessor and I also have doubts about the “green deal”. In fact in my opinion if the householder does not see a saving on his or her energy bill from day one, after factoring in green deal repayments, this initiative is going nowhere because people simply won’t go for it, sure I wouldn’t.
If say a new boiler is installed and we take the ratio of capital cost against repayments against expected working life (which will be the term of the loan) I don’t think the customer is going to be any better off, they could perhaps be even worse off than if they’d done nothing. This is because athough there will be energy savings provided by the new more efficient boiler the energy bill reduction will be less than the repayment element added over the life of the boiler, so no gain. If they really needed a new boiler they might just have well bought one on credit as anyone could do right now. The green deal will offer no advantage other than perhaps that the loan is attached to the house rather than the person. But, how that affects things like saleability or letting potential down the line is unknown. I wouldn’t really expect a potential buyer or tenant to be very keen on there being loan repayments built into their future energy bills from the day they move in. So even that aspect which the Government is promoting as a positive advantage has a down side.

Regarding big players like B&Q or British Gas “employing” energy assessors to produce EPC’s as the starting point I too am not at all keen. The whole point of the EPC system is that assessors are independant and objective. If a “green deal” provider employs them then they are in danger of becoming sales people too and clearly a conflict of interest will be introduced which will most definately not be in the consumers interest.
However if “green deal” providers simply commission EPC’s from local independant assessors who are not employees. That is continue the system that exists now for house sales and letting, or better still have potential green deal customers commission the EPC themselves, objectivity will be maintained and I see there being no problems. (at least with that part of the “green deal”)
In the interests of consumer protection and fairness this is an issue “Which” should perhaps be looking at, and lobbying Government appropriately to secure assurances and/or legislation amendments?

Guest
Whitwams says:
28 November 2011

CO2 levels have an infinitessimal effect on climate change. Fact. Anyway, whatever we do in Britain is like firing a pea at the backside of an elephant when the developing world ( which has a right to share in the bounties of the earth) eschews all aspects of CO2 control

Guest
Pete Mcewan says:
30 May 2012

At the moment you can still get non-repayable grants for the above. The Green Deal is a loan whereas in most cases it is still free to have your home insulated in the UK.
Pete McEwan
Energy Surveyor

[We have removed the links from your comment as we don’t allow advertising. Thanks, mods.]

Guest
D Spragg says:
13 September 2012

I won’t be able to make the Webinar but I would like to know what Ed Davey is going to do about the fact that Planning Permission and Building Regulations are required for all External Wall Insulation installations and this is not included in the “no upfront costs” of the Green Deal loan. These costs and risks – because Planning may well be refused – are not discussed anywhere and will not be part of the Occupation Assessment and advice given by the GDA. How will the public react when they receive enforcement procedures letters from Planning and Building Control because they had unauthorised works to their house? Furthermore, the costs of these applications and delay are not part of the Green Deal “Golden Rule” calculation, which may make the deal unviable or break this rule! Discuss.