The Green Deal Scheme Outlook

The Green Deal is a flagship policy of the new Government and is scheduled for potential introduction in 2012. The idea behind the policy is to allow home owners, landlords and businesses access to energy efficiency improvement measures where they might previously have been unable to afford the measure or could not obtain a suitable grant.

Under the Green Initiative the consumer will get an Accredited Assessment, which will be an independent inspection of the property, such as found in an Energy Performance Certificate. This independent report will help to identify what energy improvement measures could be undertaken upon the property. These measures could potentially include upgrading insulation, changing the heating system and controls, and installing renewable technologies.

The Accredited Assessment will then pass the information onto an approved Deal Provider, who are certified installers for the improvement measures that are outlined on the report. It is expected that the Green Provider will analyse the list of improvements with a view to what would be permitted to qualify for the Green Deal Finance.

There is a Golden Rule that will be applied to any potential improvement before it can be approved for Green Deal Finance. This Golden Rule has two conditions, first, that the expected saving from the improvement must be equal to or greater than the projected cost of measure itself. The second is that the repayments must not go on longer than the expected life time of the improvement measure. If a measure does not meet these criteria then it will not qualify for the Deal Finance.

If a measure does not qualify for Green Deal Finance then it may still be installed provided that the consumer either pays for the measure in full or subsidises the amount to the point where the remainder could be approved under the Green Deal Finance.

The Green Deal Finance will allow the cost of the improvement measure to be spread as repayments and collected from the property Utility Bills until such time that the debt is repaid. These repayments will be taken by the Utility Provider and will be covered under the Consumer Credit Act. Because the Deal Finance is a charge against the property utility bills any future owner or tenant of the property will continue to pay the charge until the debt is paid. In this way the debt belongs to the property.

Before work can commence on the installation of an improvement measure under the Deal Finance express consent must be given by all parties with a vested interest in the property. For example, a tenant may undertake improvement works under the Deal, but must have the landlord’s permission to do so.

In this way the Green Deal aims to making energy efficiency measures available for domestic and commercial customers, to help save energy use, make the properties better insulated and to help to reduce the amount of carbon we generate.

What Is the Green Deal?

Many of you may have heard whispers about the new government initiative called the Green Deal. Scouring the web you will find lots of pages linking to the scheme but very little in depth information. The reason for this is, nobody knows the full facts, included in this group is the government itself. This is a little worrying considering the Green Deal is due to start in October of this year. The basic structure is there but there is still so much ambiguity surrounding how this will actually work out.

The initiative itself should be an enormous boon to householders, landlords and tenants it allows all of the aforementioned groups to have much needed energy efficiency measures installed on their properties without the need for them to pay the huge upfront costs however mystery shrouds how this in practice will play out.

In a nutshell it works thus: Homeowners, privately renting tenants and landlords can take a look at their properties and think things need to be done, so the first is to engage a Green Deal accredited assessor to visit the property to carry out a survey. The assessor has to gain the new qualification to be accredited to the government standard and it is said that the assessor must also be completely independent meaning he should not be tied to any Green deal providers (the financiers) otherwise he will become nothing more than a glorified salesman with minimum qualifications working on behalf of one of the large energy companies.

The Assessors job is primarily to assess your property and make recommendations as to where your home could improve its energy rating. The government is committed to make all housing reach at least a C grade on the energy efficiency rating scale. The great thing about this is that it opens up a lot of technologies to occupiers they otherwise couldn’t afford and can go a long way towards eradicating fuel poverty. The assessor can recommend any number of measures including:

• New double glazed windows and doors
• Roof insulation
• Cavity and solid wall insulation
• New lighting systems
• Solar PV
• Solar thermal
• Replacement boilers
• Ground source heat pump

Now anyone of us can look at the above list and think ‘My house could do with one or more of those things’ but the major reason we put them off is purely down to funds, so the Green Deal is an excellent idea.

The next step once the assessor has made his recommendations is to contact a Green Deal provider, the provider is essentially the bank that will give you a ‘Green’ loan to finance the project. The Deal is neither credit checked nor means tested so from prince to pauper qualifies another excellent idea. The provider will offer finance up to £10,000 to complete the project which you can add to if you wish more work carried out. The only qualifying factor required is that your project passes the “Green Deal Golden Rule”.

The Golden Rule states that the home improvement implemented must save more money than it costs over a certain period of time. That period of time or loan repayment time period can be anything from 10 years up to 25 years. So in effect how this will work will be: For example if through the Green Deal scheme you decide to have your complete property fitted with new double glazing that cost £5000, the assessment you have had states that by having new glazing it will save you £500 a year on your electricity bill so over 10 years your new double glazing will have paid for itself.

I don’t want another loan, I have enough commitments already, I hear you cry.

This is where the scheme really is an innovation and maybe just the tonic householders need. Your Green Deal loan is paid back through your electricity bill. The idea is that the money the new installations are saving you yearly will go toward paying for your loan so if for example your electricity bill £1000 per year before your Green Deal project after your improvements your electricity bill may be £650 per year. You will still pay £1000 a year for your electricity but £350 of that goes towards paying your loan, so you won’t notice any savings but your bills won’t go up and you have a nice shiny new energy efficient home.

The new rules also state that the loan is tied to the property not the individual. Because the loan is paid through the electricity bill if you have Green Deal improvements and decide to move the new owner or utility bill payer will be responsible for the repayments however they will still be benefitting from all the home improvements.

The final stage is fairly straight forward you need to contact an accredited installer to quote for your work obviously you can have as many quotes as you like to make sure you are getting the best deal, once you have found your installer he will carry out the work and be paid directly from your provider.

All in all on the face of it this is an excellent scheme allowing everyday people to get life improving changes to their property as well tackling fuel poverty, But there is issues that need answers such as:

• Will this scheme be open to abuse by the big players by using their own energy assessors and installers or will it be truly independent. This is an opportunity for smaller companies to gain more work and it should create many thousands of new jobs.
• Who will pay for the initial assessments, if it is the homeowner then uptake will be very limited
• What interest will be paid on the loan I have heard figures of anything from 2% to 7%
• Will the government U turn on this and end up with another Feed in Tariff style fiasco

If we can get answers on these and quickly and the government introduce easy to follow and user friendly system I foresee the Green Deal being a huge success and for once a I would give the coalition a massive pat on the back.

How Does Green Deal Finance Work?

Via the Green Deal scheme run by the UK government, you can make your home more energy-efficient without paying a lot of money. Unlike other systems, it does not offer grants, but finance in the form of a loan. Still, this does not mean that it is financially burdening in any way. Find out more about Green Deal finance so that you can use it with confidence.

Scheme Basics

The scheme is designed to help you make home improvements which will contribute to energy efficiency. The list of eligible improvements includes wall and loft insulation, double-glazed windows, draught-proofing, underfloor heating, heating controls, boiler replacement and even solar panels. Other types of improvements may qualify as well. In order to make these improvements, you will receive a loan which is repaid under special terms and conditions.

Finance Eligibility and Amount

Any person owning or renting a property in England, Wales and Scotland can apply for Green Deal finance and qualify. There is no income assessment. You can qualify irrespective of the income which you earn. The finance is available from registered providers and lending criteria apply. The lender will take into account your credit score and history when determining your eligibility and the interest rate to be charged. Still, the requirements are lower so around 8 of every 10 applicants qualify.

The loan amount is based on the amount of money which you are expected to save on your energy bills. This will enable you to finance the most energy-efficient improvements which can be made. In general, you are free to make a personal financial contribution of any size. Similarly, you may use grants available from other schemes to pay for the improvements.

Repayment Term and Structure

Each Green Deal finance package has payments which are lower than or equal to the savings on your energy bills which you will generate as a result of the planned home improvements. In this way, you will incur no additional costs whatsoever. You will keep on paying the same bill or a slightly lower one. Once the loan is paid off, you will start generating major savings from the energy-efficient improvements.

The repayment term is typically between 10 and 25 years. You can select it in line with your financial plans. A longer term will result in smaller payments while a shorter one will help you to save on interest.

Finally, you should know that the Green Deal finance payments are automatically deducted from your energy bill. The loan stays with the property and does not go with you if you move to another house.