07 Feb 2014

The Green Deal: A Ground Breaking Home Improvement Initiative?

The Green Deal: A Ground Breaking Home Improvement Initiative?

Fiona Wildgoose, Partner, considers the Green Deal government initiative introduced to improve the energy efficiency of UK households.

Fiona Wildgoose, Partner, considers the Green Deal government initiative introduced to improve the energy efficiency of UK households.

The Green Deal is a government initiative aimed at improving energy efficiency in UK households.  It has been heralded as the largest home improvement programme since World War II.  It was launched in October 2012 as a result of the 2011 Energy Act.  The aim is to encourage homeowners to make their homes energy efficient without having to pay an upfront fee.  It is not a government grant, but a financial package of up to £10,000 to spend on energy saving measures.  These measures could include insulation, double glazing or a new boiler.  There are currently 23  measures to choose from. The financial package is not considered a loan, as the repayments are attached to the property and not the individual.  The costs are paid back through small payments taken out of the property’s energy bills.  Up to £10,000 is available for the works and the money will be paid back over 25 years.

The Golden Rule of the Green Deal is that the money paid back will never be more than the saving made.  A home metre may be fitted and the repayments calculated on the savings made from the improvements made.   You will not pay back more money than you are saving on your new bills each month.  For example, if you have insulation fitted and this saves you £11 per month on your heating bills, then your repayments will be less than £11 per month.  

Homeowners have been able to apply for finance for The Green Deal from 28th January 2013.  The first stage for bill payers is an initial consultation or assessment carried out by a qualified Green Deal advisor.  The current energy performance of the building will be assessed in order to decide which measures could and should be implemented through the Green Deal.  The assessment will also make sure that the bill payer will make savings equal to or more than the cost of installing the measures.  The assessor then provides a quote to include the cost of the improvements, what the anticipated savings will be and how long the repayment will take.  The bill payer can obtain quotes from other Green Deal accredited installers should they wish prior to accepting any quote.  Once a quote is accepted, the financing for the Green Deal plan would be dealt with by the Green Deal Provider.  The loan repayment is attached to the property’s energy bills.  So if the property is sold or passed on, the Green Deal repayments will stay with the property.  

The loan repayment is stretched over a period of 25 years so that the debt is paid back each month in small amounts.  As mentioned above, the amount paid back will always be less than the saving made.  Once the financing measures are in place, the energy efficient measures would then be installed by an accredited Green Deal installer.  Only an authorised Green Deal installer can install energy efficient improvements as part of the scheme.

It is important to be aware that any funds received through The Green Deal are not paid back directly to the lender, but are added to the property’s energy bills.  Therefore, the person in charge of the energy bills is responsible for repayments.  This is the case even if the property changes ownership, so purchasers should be aware that if the previous owner obtained funding through the Green Deal, there may still be funds to be repaid which costs will be added to the property’s energy bills until such time as the funds are repaid in full.  However, you will be acquiring a more energy efficient house that will ultimately save you money in energy costs.

Over 70 Green Deal assessor organisations, employing over 600 Green Deal advisors, have been accredited, and it is believed that over 2,000 assessments have been carried out since the end of January 2013.  However, it remains to be seen just how restrictive the criterion are for inclusion in the scheme.  For example, if the cost of the Green Deal measures could not be recouped within a 25 year period, being the life expectancy of the improvements, inclusion in the scheme would be considered non-viable.

Fiona Wildgoose, Partner

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