Green Deal

Alongside the ECO scheme the coalition government’s flagship environmental scheme the Green Deal was launched on 28th January 2013  The Green Deal provided a novel financing mechanism, whereby the costs of retrofit measures would be levied on household electricity bills over a fixed period. The initiative was governed by a ’golden rule’; whereby the energy savings resulting from the measures must be equal to or greater than the capital costs of those measures, once interest had been factored in. As shown in, part of the novelty in the scheme arose from the fact that the loan would be attached to the home rather than the occupant, removing the issue of legacy payments once a property was sold.

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Figure Marginal Abatement costs of retrofit measures & Green Deal

Green Deal Home Improvement Fund

 

However the Green Deal has been far from a success, by March 2015, 501,906 Green Deal assessments had been undertaken, although only 5964 ’Green Deal Plans’ had been implemented. To incentivise increased uptake the government launched the Green Deal Home Improvement Fund (GDHIF); a cashback mechanism allowing up to £1,250 towards the cost of installing a range of efficiency measures alongside a green deal package. Although these schemes quickly saw their funding used up, they did little to incentivise wider uptake of the Green Deal.

 

Such was the failure of the initiative that as of July 2015, the government has decided to stop funding the Green Deal Finance Company (GDFC).The GDFC was set up to lend money to Green Deal providers, therefore effectively killing off the scheme. shows the extremely poor take up of the Green deal finance mechanism in comparison to ECO, by August 2015.

 

Table  Provisional number of individual households that have had measures installed through ECO, Cashback, using Green Deal finance or Green Deal Home Improvement Fund

Delivery mechanism
Installation Month1 ECO Cashback Green Deal Finance Plans Green Deal Home Improvement Fund Total number of individual households
Total to date 1,232,068 14,743 9,999 25,419 1,272,929

Several studies have inferred some explanations as to why the scheme has been such as failure. anticipated issues surrounding consumer appeal for the scheme, given uncertain modest financial savings whilst at the same time delivering limited potential returns to investor, alongside significant technical risks associated with the well documented ‘performance gap’ associated with efficiency interventions. Indeed in an ex post user survey of the scheme, confirm that the high interest rates of 11% had a significant role in dissuading the respondents from applying for a Green Deal loan. However, although many respondents supported the principle of a loan levied on energy bills, 37% of respondents in the survey had not heard of the Green Deal and the majority had a very limited understanding of the scheme.

It can therefore be argued that the UK government’s recent supplier obligation and market based initiatives, have had limited success in delivering a comprehensive programme of low energy retrofit, across the UK housing stock. It can be seen that the majority of installations delivered through current policy initiatives have incentivised piecemeal interventions, targeting the lowest cost measures in order to meet nationally amortised energy reduction and CO2 targets.

Potential for Reduction in Energy and CO2 Emissions

 

The issues surrounding the barriers facing energy efficiency interventions will be explored in more detail in Section of this report. Notwithstanding these barriers, there is significant potential for reduction in energy and CO2 emissions through a whole house or ’deep retrofit’ approach across the UK housing stock. Indeed as much as 50% reductions in delivered energy can be achieved by improved building fabric performance and increased efficiency of gas heating as demonstrated by With the inclusion of relatively modest amounts of on-site renewable microgeneration over 80%  reductions in onsite CO2 can be achieved.