The Green Deal has really come under fire over the last few months – some of it is justified, some of it inaccurate. I want to break down some of the criticisms and give you an honest appraisal of the scheme and why getting an assessment is still worthwhile.
Green Deal Providers haven’t yet got finance
This is the fundamental problem with the Green Deal – there are not enough providers out there with Green Deal finance, therefore households are struggling to take up the scheme. It was only a few days ago that DECC announced only 12 households had taken up Green Deal finance at the end of August, however over 60,000 assessments had taken place.
Now this is a little deceiving, because Green Deal finance isn’t the only way to go after an assessment, and lots of people opt to self fund and then get the cashback, or are getting an assessment to get an ECO installation. Still, that figure is very concerning
The reason for this low take up of the loan aspect of the scheme is that not enough providers have the ability to finance the install of measures. Nick and I went to a parliamentary session where the Green Deal finance company was talking about where they were and the on boarding process to get new companies up and running. I came away with the feeling that these guys needed to get moving quicker and that some of the issues they are encountering in the process should have been ironed out in 2011 / 2012.
In addition, due to the speed at which it was launched there are many technical issues, for example the Green Deal report completed by assessor A could not be used by Provider B – leading to additional house visits required – all in all making it more complicated for the end user.
Green Deal Installers
There are simply not yet enough installers signed up – even trying to become a Green Deal assessor organisation took us months, but that is nothing compared to the hoops the Green Deal installers need to jump through to get their accreditation. Gradually more are coming on board though, so this will soon become less of a problem in the coming months.
Green Deal Assessor Organisations
For me, as the Director of a Green Deal Assessor Organisation, the fundamental problem we are facing is actually an issue with Governmental software – when potential customers go to find Green Deal assessors they tend to go via the Green Deal orb. In theory they can put in their postcode and it shows local assessors.
Well I can say first hand that this doesn’t happen – the algorithm is completely random so the assessors displayed will be all over the country. The issue is that these assessors then say they can fulfil the assessment and set about trying to sell this lead to an assessor in the actual location.
It seems ridiculous that we are currently working on behalf of assessor organisations across the country to fulfil their green deal assessments in London, when we are based here and customers could be directed straight to us. Likewise we will only ever cover London – we don’t want customers ringing from Manchester – it is a waste of our time and theirs and it just increases lead times to get assessments carried out.
Our advice is to check where the company is based, and don’t take their word that they are a nationwide company – they probably aren’t and you will end up waiting longer for your assessment.
The End to End process
Unfortunately at present, no-one that we know offers the full process end to end. This is something that everyone is trying to get in a position to do, but at present with the on-boarding of the Green Deal providers in relation to being able to offer the Green Deal finance it is proving more difficult. This doesn’t mean you can’t get job done in 2 parts however, it just makes the process more difficult.
The Green Deal Finance Rate
Now there are three ways to take advantage of the Green Deal, firstly you can self-fund which allows you to take advantage of the cashback and rest safely in the knowledge you are getting a reputable installer. You can use ECO funding in certain instances, which is basically a grant, and the final way is to use Green Deal finance.
Green Deal finance is provided based on the energy savings produced by installing a particular measure.
For example if the life expectancy of a new boiler is 10 years and installing a new boiler would produce savings of £120 a year, then you would be offered £1200 towards a new boiler – payable over the 10 years.
The problem is that there is an 8% financing charge attached to this £1200 ‘loan’. This is very high – if you chose to extend a mortgage it might only be 3-4%.
The only thing in its favour is that people with bad credit ratings (which is intrinsically linked to fuel poverty) are able to access this finance, when the potentially wouldn’t be able to get the finance through other avenues. Plus, the rate will not change over the whole period of the loan, whereas mortgage rates could be 10% in 10 years time for all we know.
Selling your home in the future
This is one that I am seeing more and more in the press – who would want to buy a home that has a loan attached to it?
In my opinion, this is absolutely ridiculous, since the finance is a direct replacement for the higher bills. For example if you are spending £100 a month on your energy bills before taking on any Green Deal finance, then you decide to implement measures that will produce £10 worth of energy savings – then you are still only going to be paying £100 (made up of £90 worth of energy costs and £10 worth of Green Deal finance).
The thing is that before getting energy efficiency measures installed, all £100 has the potential to go up by the annual 10% energy price hikes. In the second example where you have Green Deal finance, then only £90 can go up by energy price hikes. I know this is relatively small, but actually by have Green Deal finance you are insulating yourself against inflating energy prices going forward.
So therefore why on earth are people picking this as the issue for taking Green Deal finance?!
Moving from free installs to paid installs
Under existing energy efficiency Government initiatives, funding has normally been free, so the household can get free loft insulation etc. Suddenly we have moved to a paid model – people have to fund measures themselves (unless you are eligible under ECO).
We constantly get phone calls asking if we can do an assessment only for people to say they are not interested when we say there is a cost associated with it. It might take another couple of rounds of 10% energy hikes before people accept that actually spending £150 to get the report in the first place is worthwhile if they can take advantage of £1000 worth of cashback as well as make big big savings on their energy bills.
Just bad Timing!
The Green Deal went live at the end of February – meaning that people were starting to look for finance in the middle of the Summer. We had a great summer this year, so people don’t need to make their houses warmer at this time!
We have had a whole raft of people getting in touch now from assessments we completed earlier in the year suddenly looking to take advantage of the scheme ahead of Winter.
In Future of The Green Deal
The Green Deal clearly has a future – but it was launched before it was ready. It is as simple as that. Providers needed to be ready to go before Green Deal reports could be issued. We are just getting to the point now where we are seeing Providers getting the finance in place as well as developing sufficient installer networks under them.
Unfortunately though all we hear in the press is that the Green Deal is doomed to failure. I for one don’t think this is the case at all – granted it is not going to work for everyone, but still it provides a mechanism for a massive amount of people to get measures installed.
Yes it has got off to a slow start, but surely if we can communicate the scheme better and make the loan rate more competitive, then 2014 could be a great year for the Green Deal!
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