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Consumers won’t be able to access Green Deal loans until 2013

Green policy news – by Louise Bateman
11th June 2012
Special Green Deal loans that underpin the Government’s flagship energy efficiency programme will not be available for those looking to make improvements until early 2013, the Government confirmed today as it set out secondary legislation to bring the scheme into operation.
The Green Deal will officially launch on October 1 2012, Energy Secretary Ed Davey confirmed today, but only for Green Deal assessments or for those consumers with the money to pay upfront for the work to be carried out and those benefiting from the Energy Company Obligation (ECO), an initiative whereby consumer energy companies will have to provide £1.3 billion a year in energy efficiency upgrades for low income and hard to insulate homes. Consumers looking to make energy efficiency improvements to their properties through the multi-billion pound Green Deal financing scheme will have to wait until the end of January 2013, when the necessary legislation is in place.

In a written Ministerial statement to Parliament today, Davey said the required framework would be in place for assessors and installers to be fully accredited to carry out Green Deal work from October this year ahead of the "first fully completed Green Deal plans in early 2013" – effectively meaning the Green Deal will not launch in earnest until then. 

And DECC confirmed that it now expects the Green Deal to take up to 18 months to gain traction. 

It has been known for some months that the Government would be launching a scaled back version of the Green Deal in October, but this is the first time the details of how the rollout will be managed have been set out. It lends weight to earlier reports that the energy firms need more time to get their billing platforms in place to collect payments for the scheme from October, but may also explain why initiatives such as the Green Deal Finance Company, which is awaiting initial financing from the Government, has had to call a halt to operational developments until the funding is in place.

Green Deal for business
In another development, a DECC spokesperson told GreenWise that the Green Deal for business would launch alongside the domestic Green Deal as had been originally planned. Ministers had been looking at delaying the Green Deal for business until after the launch of the domestic scheme due to the complexity of the non-domestic market.

"The non-domestic Green Deal will be available at the same time as the domestic Green Deal," he said.

The spokesperson also confirmed that the October 1 launch would effectively be a "soft launch" enabling Green Deal accreditors, assessors and installers to get up and running and for 'Green Deal Providers’ – those managing the finance plans – to "test" systems and operations. 

"Consumers will have to wait until January 28th to access Green Deal finance packages, when the regulations comes into force," he said.

The Green Deal, which has been touted by the Government as the biggest national improvement programme since the Second World War, aims to cut energy bills and carbon emissions from buildings by making energy efficiency easy and affordable for householders and businesses. Under the scheme, consumers will be able to invest in loft and cavity wall insulation, lagging and other energy efficiency measures, at no upfront cost by taking out loans that will be paid back through savings on their energy bills achieved through the energy efficiency improvements.
 
Green Deal details
Latest estimates by the Government, show the Green Deal policy will cost between £14.9 billion and £18.8 billion, but that these costs will be largely borne by the beneficiaries of the energy efficiency measures, who will benefit from direct energy savings of between £12.7 billion to £16.2 billion and additional 'comfort’ benefits of between £2.8 billion and £3.7 billion. Meanwhile, it says the scheme will support up to 60,000 jobs in the insulation sector alone by 2015 – more than double the number employed today.

Up to 45 measures are now covered by the Green Deal, including newly introduced ones such as HVAC systems, rooflights, radiant heating, and energy efficient taps and showers.

The final Green Deal policy also includes changes that will see an estimated 2.8 million hard to treat cavity wall properties eligible under the ECO and an extra 100,000 households in low income areas benefiting from Green Deal measures each year compared to 130,000 a year, as previously set out. The costs of the ECO are expected to be passed onto energy consumers through their bills. 

"Today I have published the Government’s detailed plans along with legislation that will allow the industry to bring the Green Deal into existence," said Davey. 

"We have listened very carefully to what industry, consumer groups, and other organisations have told us. Broad support for a managed, tested and careful introduction of the Green Deal fits exactly with our objective to provide an excellent customer experience from day one and a market where a range of new players can readily participate.

"I am determined to make sure that, in addition to creating huge opportunities for Green Deal providers and businesses along with thousands of new jobs, this new market in energy efficiency will deliver the very best deal for consumers."

Consumer protection
Among new measures to protect the consumer announced in today’s publications are restrictions on 'cold calling’ and new rules requiring Green Deal assessors to declare any commission they might be receiving for carrying out an assessment. They will also have to reveal any ties they might have with Green Deal Providers. 

But the changes are unlikely to satisfy Which? consumer group, which has been calling for big changes to the Green Deal so it adequately protects consumers, including ensuring that the amount a Green Deal company can lend a consumer takes into account their actual energy use, instead of basing it on average figures.

Golden Rule
Under the so called 'Golden Rule’, the amount of Green Deal finance that a provider can attach to the energy meter should not exceed the projected associated cost savings on an average energy bill for the duration of the Green Deal finance arrangement, which could be for as long as 25 years. The Government says this will protect consumers from higher energy bills and investors from a higher risk of default on the bill, but Which? says there is no guarantee that consumers will not end up paying back more in their regular payments than they end up saving on their bill from using less energy – and there is no redress if consumers end up paying more than they save.

A spokesperson for DECC told GreenWise: "We have consulted extensively with industry and are confident that the methodology that we have set out for calculating the Golden Rule is robust. We have built significant protections into the Golden Rule, including a precautionary reduction in the level of the savings that can be achieved by different measures, to allow for factors which may have an impact on their in-use effectiveness."

Lower average energy bills
In response to concerns that the Green Deal will hike up consumer energy bills, DECC said today that its final Green Deal and ECO Impact Assessment published today, shows that taken together the measures are expected to lead to lower average energy bills in the long run when compared with the 'do nothing’ scenario. 

"The average impact on energy bills from 2013 to 2022 will be £3. However, from 2017 the energy saving benefits will outweigh the costs of the measures installed and by 2023 the impact on energy bills will be on average -£55," a DECC spokesperson said.

Green Deal Code of Practice
DECC also confirmed today that it will publish the Green Deal Code of Practice later in June and that it has appointed Ofgem to be the ECO administrator. It said it will also shortly be appointing a Green Deal Registration and Oversight Body and a Green Deal Ombudsman and Investigation Service. 

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Related links:
www.decc.gov.uk




Consumers won’t be able to access Green Deal loans until 2013
Green Deal finance plans will not be accessible until early 2013
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