What is the Green Deal?
Unlike traditional finance schemes where the financial obligation of paying the loan back is directly on the individual who took out the loan, under the Green Deal scheme, the loan is attached instead to the electricity meter.
This means that should the current occupant of the property move out of the property (e.g. sell or move out if renting) the new occupants will be obliged to take on the Green Deal finance debt.
The Green Deal was set up to help improve the energy efficiency of properties across the UK, since many of the properties we live in are very inefficient, with solid walls, old heating systems and very little insulation. This scheme allows people to improve their homes without having to stump up the entire upfront costs of the works.
The scheme is open to every household in the UK, but there are 3 primary aims:
- Allow private landlords to meet the new regulations that are due to be introduced in 2018 stipulating that rented properties must meet minimum efficiency standards in order to be rented out.
- Help homeowners/tenants install energy efficiency measures, even if they are unable to find the funds upfront before the works will commence.
- The Green Deal is also aimed at those who want to increase the value of their homes through installing renewable energy or energy efficiency measures.
The Green Deal is finance, not a grant
It is worth reiterating that Green Deal finance is not a grant – it is finance and an example of a pay-as-you-save energy saving scheme, where repayments are made through the energy bills.
If you take out Green Deal finance to help pay for the measures, your energy bill will no longer just show the amount you spend on gas and electricity: it will also show a finance amount. You can see in the table below we have drawn a very crude representation of how Green Deal finance works. On the left you can see your existing energy bill (100% energy and gas). On the right you can see your new bill (including the Green Deal finance charge which is in yellow).
The key here is that the energy bill doesn’t go up even after installing the energy saving measure. This is known as the Golden Rule and is central to how the funding mechanism works.
The Golden Rule is theoretical though, and actually in real life your energy bills may go and up and down slightly. The amount of funding you can get under the Green Deal is calculated via the Green Deal report, which calculates the yearly energy savings you could expect from installing the different energy saving measures. It takes this theoretical energy saving from the report and multiplies it by the lifetime of the measure you are installing.
A basic worked example of the Green Deal
The easiest way of showing this is using an example – so lets imagine replacing an old boiler with a new energy saving boiler.
e.g. Green Deal report says the annual savings from replacing the boiler are £50.
Take this £50 annual saving and multiply it by the lifespan of the measure you are looking to install. For boilers this is 12 years so £50 x 12 = £600.
This is the total Green Deal funding you could expect to get in this example.
To be honest this example is pretty typical of the kind of financing that is available. We talk about the cost of replacing a boiler here, but the cost is considerably more that the amount of finance you can get!
The take-home message here is that, in most cases, unless the energy saving figures are very high on the Green Deal Report, then Green Deal finance is unlikely to cover the total cost of the works.
Getting more finance
As mentioned, one of the problems facing the green deal has always been the constraints of the golden rule. This really limits the amount of funding available for most people. Having spoken to the Green Deal Finance Company in March 2017, they are planning on looking at changing this legislation to relax this rule.
The impact of this is very significant, because if the legislation can be changed then most people will be able to get their new energy efficiency measure installed all covered by the Green Deal loan.
In the meantime, there are two imminent changes being introduced to help maximise the funding for customers.
- Add top up loans – although this will be via the normal finance routes so the person taking out the loan will be responsible for repaying it regardless of whether they sell / move out of the property in the future.
- Installing energy saving measures with better efficiency factors. Basically this refers to the software currently in use – basically it simplifies the whole process and says that if you install a new boiler, the energy savings are the same regardless of the new boiler used. In reality, new boilers vary on efficiency – so better boilers will be more efficient and produce bigger energy savings. Soon this will be reflected in the Green Deal advice report, allowing for more funding if better energy saving measures are used.
Who can get the Green Deal?
In theory, any home can access the Green Deal, but the scheme has been specifically tailored to the private home owner or the private rental sectors. The reason being is that the social housing sector already has several ways in which improvements are funded and undertaken – namely the ECO scheme.
The key requirement of implementing a Green Deal measure is that the finance needed to pay for the measure gets attached to the ‘electricity meter’ within the property and therefore if the homeowner moves out, the new person coming in will take on the Green Deal. As a result of this, the measures included within the scheme are ‘non portable’, for example LED bulb lighting replacements and electric heaters that have plugs – both would be considered portable and therefore ineligible for the Green Deal.
The Green Deal Process
The following section talks a bit more about how the Green Deal process works end-to-end – starting with a Green Deal assessment, and ending with the energy saving measures installed in your property by a Green Deal Installer.
- Get a Green Deal Assessment completed on your property by a certified Green Deal Assessor. This is a standalone service that requires an assessor to visit your property and undertake an assessment of how energy efficient the home is. Following the visit a Green Deal Report is produced, which lists the recommended energy efficiency measures listed as well as the energy savings.
- Review the measures suggested on the Green Deal report and decide if they are appropriate for you – the finance available will be based on the energy savings. There is no obligation to carry out any works!
- Go to the Green Deal Orb to find Green Deal installers who can carry out the works and get quotes.
- Ensure you are happy with the quote and agree the Green Deal plan with the provider – this can be a combination of Green Deal Finance, other finance as well as a self-contribution.
- An installer will complete the work and you as the customer should be benefiting from the energy improvements.
More details about the Green Deal Assessment
The independent Green Deal assessment is the first part of the Green Deal process and will take at most a couple of hours to complete – from the surveying to the actual write-up and post assessment support.
The first part will be a non-intrusive survey by the Assessor (don’t worry- no floor boards will be lifted up!), and the second half will be an interview with you to learn more about your energy usage habits.
The non-intrusive survey is known as the Energy Performance Certificate (you might be familiar with the EPC if you have sold, bought or rented a private property since 2007) – this is all about the energy performance of your property but it does not take into account how you use energy
The occupancy assessment is the second part of the Green Deal Assessment and this is where the assessor learns more about how the household uses energy. This takes the form of an informal interview, where the assessor asks about 15 energy usage questions and also takes a detailed look at the energy bills for the home. During this occupancy assessment your Green Deal Assessor should in addition be able to provide you with some easy tips and tricks to help lower your energy usage.
Once both parts of the assessment are completed, a Green Deal report will be completed, which will suggest a series of energy efficiency measures that can be installed in your home. These will obviously vary from house to house, and the amount that you will be able to borrow will depends on the estimated savings calculated.
Green Deal Reports and the funding available
In practice the amount of funding available will depend on the following criteria:
- Age and fabric of the property;
- Quality of existing insulation and heating systems;
- Size of the property
In our experience though, it is very unlikely Green Deal finance will cover the whole cost of the works unless the property is particularly large; so you need to be prepared to self fund some of the works, or take out the top-up finance.
Green Deal – things to bear in mind
There are a few things that we here time and time again when we are doing these Green Deal assessments, so we have included a few of these things below!
- The finance you get is on the electricity meter, therefore if you decide to leave the home, the next occupant will take on the finance. This should not influence the next buyers’ decision to purchase your home, however. Green Deal finance suggests the home will have cheaper energy bills, which should more than offset the Green deal finance.
- You can choose to pay off your Green Deal finance early if you so choose, although there may be a financial penalty for doing so – your Green Deal provider should be able to advise on this.
- Just because recommendations are given doesn’t mean that you are obliged to take them.
- You can’t influence the recommendations – just because you want a new boiler, if the energy efficiency gains and therefore cost savings aren’t there, it isn’t going to happen.
- Double glazing is great, but it does not produce the kind of savings that just about everyone we speak to presumes it does, based on the high initial costs of getting it installed!
- The key to increased energy efficiency is targeting the envelope, this includes wall insulation, floor insulation, loft insulation and draught proofing – loft insulation is cheap and can make a massive difference.
- Manage your expectations – choose too many measures and the costs will increase meaning there may not be a big self-funding gap to plug to pay for the measures.
- Try to get an independent and impartial assessment! Many companies are aligned to installers which means they are going to be getting commission for selling you certain products. Impartial assessors are out there (and we just happen to be one of them).
In the following section we look at some other aspects of the Green Deal.
How does the Green Deal help improve homes?
By installing insulation throughout your home, the heat produced from the heating system will not escape as quickly as before so less fuel will need to be used up to keep a comfortable temperature. In addition, if a new, energy efficient boiler is installed in the home, more useful heat is produced from every unit of fuel burnt, again helping to lower bills.
Types of measures currently covered in the Green Deal scheme:
- Upgrading the energy efficiency of the envelope of the property, by increasing the amount of insulation in the loft and floor and installing either cavity wall insulation or solid wall insulation.
- Upgrade old boilers to new, energy efficient condensing boilers with heating controls including thermostats and programmers.
How does the Green Deal help improve energy awareness?
The Green Deal Assessment is a value-added process as it makes the occupier more informed about their everyday energy usage habits. In turn, better energy awareness should drive occupiers to use their energy more wisely, which should drive down the cost people pay. For example: reducing the temperature of the hot water cylinder thermostat, installing central heating thermostats in the correct location, reducing water levels in kettles, washing clothes in ‘eco-mode’, and turning off unused high energy usage appliances like chest freezers should all help with lower energy bills.
We list 100 ways to save energy in the home here – even if you adopt a few, you should see some nice energy savings on your utility bills.
Green Deal finance & the ECO grant
Green Deal Finance is a loan that customers can apply for, which is determined by the savings estimated on the Green Deal Occupancy Assessment. As mentioned the amount of finance available will vary on the type of home that is being assessed. Payments are made through the electricity bills over a number of years. Green Deal Finance can also be used in conjunction with ECO.
There is an additional grant component known as the Energy Companies Obligation (ECO) that is available to vulnerable members of society: the elderly and those that are energy poor (under £15,600 income). At present it is not possible to combine the ECO grant and Green Deal Finance