Is the Green Deal Scheme Failing?

The Green Deal scheme isn’t working, only 384 deals have been sealed from a target of 10,000 by christmas. Only 12 of these deals is actually live. Why?

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The Green Deal scheme was the government’s new flagship energy policy for improving the energy efficiency of our homes.  Through the scheme homeowners can borrow money to install a range of energy saving technologies including:

  • Double glazing
  • Loft and wall insulation
  • Efficient boilers
  • Renewable technologies

The savings the homeowner makes on their energy bill would outweigh the cost of the repayments.  And if the owner were to move homes, the loan would transfer to the new owner.

It sounds like a great idea.  There were big hopes that the Green Deal scheme would do well.  However, 8 months in and only 384 deals have been signed of which 12 are ‘live’.  This is way off the 10,000 sign up target the minister for energy and climate change, Greg Barker expected.

So is the Green Deal scheme failing?  I believe it is.  As I will discuss later the scheme is too complex and there is a lack of funding and high interest rates for the end user.

But it is not just me who is having reservations about the Green Deal Scheme.

 

Labour calls for a replacement to the Green Deal scheme:

Labour recently announced that if they were in power they would replace the Green Deal scheme and the Energy Companies Obligation (ECO) with an alternative.  They are in the process of launching a consultation for the Green Deal in coming weeks.

Labour has said ‘The Green Deal is obviously not working so we will be consulting on what to replace it with.’

It is easy to see what they mean.  Only 12 Green Deals were ‘live’ at the end of august.  Live means that the customer has had their energy saving technology installed and they are paying off the cost of the work through their energy bill.

In 8 months and after spending £16 million only 384 deals have been signed and 12 are live.  It isn’t working.

 

99% of people decline Green Deal scheme:

The DECC show that 71,000 assessments were completed by mid September.  This means that more people may sign up to the scheme in coming weeks and months.  The government welcomed the figures and said they were expecting growth in the autumn.

But how can they welcome the fact that 1% of people who have assessments get signed up.  What is making the other 99% decline?  That is a serious problem that must be addressed.

 

What is going wrong?

It is the small businesses, the Green Deal assessors and installers calling for a change to the scheme.  These small businesses were supposed to be the backbone of the Green Deal.

 

Complexity:

The scheme is too complex and the cost of borrowing is putting potential customers off from signing up.  Their biggest criticism is that the Green Deal scheme has to be made easier.  Customers face problems of:

  • Arranging assessments
  • Getting copies of Green Deal advice reports
  • Being refused quotes from Green Deal providers (when an assessment has been prepared by an independent assessor).

 

High cost of borrowing:

One of the biggest problems facing the Green Deal scheme is limited funding running through the Green Deal supply chain, and high interest rates.  Standard rates currently stand at 7%.  This will of course put potential customers off.

 

The future of the Green Deal scheme:

Can there be a future for the scheme? Yes, but not in its current state.  There are things that could be changed.

Bob Beattie, the Director of BH Synergy Limited suggested that ‘reducing the interest rate to 0 per cent for a year and then raising it progressively,’ and a bigger push for renewables could benefit the scheme.  Most cashback incentives are being funnelled into installing gas boilers where some should be pushed into renewables to inspire growth.

The DECC expects that take-up will improve in the autumn.  This is because the number of Green Deal finance companies is hoped to increase 6-fold.  One of the problems the Green Deal scheme has faced is the delay of getting finance providers approved.  An expected 50 loan providers should be approved by the end of the year.

Government has always said this is a long-term scheme.  However, these improvements are needed now, not in 5 or 10 years time.  Fuel poverty will get worse and we need to start making proper steps towards our 2050 climate reduction target.

The scheme is picking up pace (very slowly), if it were made simpler and there was more funding with lower interest rates then I believe there is a chance this could be a success.  Otherwise I would be intrigued to see what proposals a Labour government would have on changing the Green Deal.

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