The Green Deal explained
Here's how the Government's flagship energy efficiency scheme works and what to watch out for.
The Government's Green Deal scheme has launched, although there are still some details to be finalised. Here's the lowdown on the scheme as it stands.
What is the Green Deal?
Very simply, the Green Deal offers loans to pay for energy insulation measures such as cavity wall and loft insulation, and renewable energy products including solar panels. The repayments for the loan, including interest, will be added to a household’s electricity bills.
However, the whole initiative is built on the premise that the savings a household will make on its energy bills will quickly outweigh the repayments. This has been called the ‘Golden Rule’. There are concerns that installations will struggle to meet this Golden Rule and that a lot of the onus will be on households to radically change how much energy they use as well.
How the process works
The first stage is to book a Green Deal assessment. A qualified assessor will spend around two hours looking at the energy efficiency of your home and how you use energy.
They will provide you with an Energy Performance Certificate (EPC), similar to ones you see on appliances such as washing machines and fridge-freezers. This will show your current energy efficiency rating and a potential rating if you made some improvements.
They will also provide a tailored report, which will recommend energy-saving measures you can take yourself and any you could apply for through the Green Deal.
Any improvements that require financing will have to meet the Golden Rule of saving you more over time than they cost to install. This should be set out in the costing.
Who’s offering the Green Deal?
Companies including British Gas, Carillion, E.ON, Keepmoat, npower and SSE have signed up to become Green Deal providers. More companies are likely to be announced in the coming weeks. You can find a list of companies in your postcode on this Green Deal website.
What will the interest rate be?
It appears that individual providers are setting their own interest rates of between 6% and 9%. The average interest rate is expected to be around the 7% mark.
Are there any incentives for getting a Green Deal loan?
Yes, the Government is making a total of £125 million available in cashback for people who sign up early on, although only the first £40 million will be guaranteed at the rates listed below.
It’s a first come, first served offer and you have to arrange the work through a Green Deal provider to be eligible for the cashback.
Here are the cashback amounts being offered now:
Energy efficiency measure
|Loft insulation (incl.top up)||£100|
|Cavity Wall Insulation||£250|
|Solid Wall Insulation*||£650|
|Flat roof insulation||£390|
|Room in roof insulation||£220|
|Hot water cylinder insulation (top up)**||£10|
|Heating controls (roomstat and/or programmer & time/temperature zone controls)**||£70|
|Condensing oil boiler from non-condensing oil heating or other ***||£310|
|Upgrade boiler to condensing gas boiler from non-condensing boiler or other.||£270|
|Flue Gas heat recovery (condensing combi boiler) only alongside replacement boiler||£90|
|New or replacement storage heaters||£150|
|Replacement warm-air unit||£60|
|Waste water heat recovery systems||£60|
|Double/Triple Glazing (old single to A)||£20 per m2 up to a maximum of £320|
|Secondary glazing||£15 per m2 up to a maximum of £230|
|High performance replacement doors||£40|
* A minimum of 50% of external walls must be insulated to qualify for cashback.
** Cannot be claimed at same time as boiler replacement (as this is a regulatory requirement).
*** Householders should consider their renewable heat options, as they could get a higher payment under Renewable Heat Premium Payment now, for certain measures.
The work must also be completed within specified timelines, which are six months for solid wall improvements and three months for other improvements. All improvements have to be finished by 31st March 2014. This cashback scheme is only operating in England, Wales and Northern Ireland.
If you live in Scotland, the Government is offering up to £500 in cashback, with a further £100 to pay for the assessment. You can find out more about this on the Energy Saving Trust Scotland website.
What if I want to switch energy supplier?
You can switch energy supplier but only to another supplier that is participating in the Green Deal finance scheme. It’s not clear if the interest rate could change as a result of you switching.
What if I move home?
If you move home before the loan has been paid off then the idea is it remains on the bills and has to be paid by the new householder. However, in reality, the buyer may ask you to pay off the Green Deal loan before they purchase your home. This could incur a high early repayment charge, so if you are planning to move in the future make sure you factor this in to your calculations.
Make sure you shop around
You should shop around for both your assessment and any works you want done. When you're getting quotes for an assessment, be aware that some companies will not charge you up-front, but only if you then commit to them doing any work.
It looks like the average assessment will cost around £100; British Gas has been offering one for £99 for a few months.
You should be very not to commit to any works during the assessment before you've had a chance to look at any paperwork. Resist hard sells such as fantastic discounts that are only on offer for a limited period of time.
And you should definitely get more than one quote for the works.
Could you pay for improvements another way?
Of course, the Green Deal isn't the only way you could fund energy efficiency improvements. If the works cost a few thousand pounds, you could spread the cost interest-free over up to 16 months via a 0% purchases credit card. You may also be able to increase the size of your mortgage, at a lower interest rate than offered by the Green Deal.
Or you may even find a personal loan is cheaper in terms of the interest rate, although you won't have as long to pay it back as you would have done via the Green Deal and you need to watch out for any other fees.
With any of the above options, you will have greater flexibility to shop around for a company to carry out your improvement works. But it's probably worth paying for a Green Deal assessment anyway, as this will highlight the parts of your home that may need improving, unless you already know what needs to be done.
Advice on energy efficiency
If you want help and advice on energy saving and information about schemes you may be eligible for, you can call the impartial Energy Saving Advice Service on 0300 123 1234 if you live in England, Wales or Northern Ireland. Calls are charged at standard national rates.
If you live in Scotland, call your local Energy Saving Scotland advice centre free on 0800 512 012.