The promise of the Green Deal

Ener-G Controls, Green Deal, Golden Rule
Spelling out the Green Deal — Gary Dowsett.

The Government’s Green Deal, which promises a revolution in energy efficiency, was officially ‘soft’ launched on 1 October 2012, with an initial focus on low-energy installations within the social housing sector. Gary Dowsett of Ener-G Controls tells you what you need to know about it.

The Green Deal aims to cut energy bills and carbon emissions from buildings by making energy efficiency easy and affordable for businesses and householders. It is designed to eliminate the need to pay upfront for energy-efficiency measures and provides reassurances that the cost of the measures should be covered by long-term energy savings (paid on a pay-as-you-save basis) through energy bills.

It remains to be seen whether the Green Deal will deliver its intended aims, particularly in the early phases as there is widespread industry criticism of a lack of thorough preparation for its introduction. In particular, there is a lack of detail on the intricacies of how the financing mechanisms will work, how the 'Golden Rule', ensuring protection to customers, will work and when it will be fully rolled out.

Nevertheless, the Government predicts that its initiative will deliver energy-efficiency and heating measures worth an estimated £1.3 billion.

The scheme will fund a broad range of approved energy-efficiency measures via Green Loans, provided by Government-accredited Green Deal Providers.

The projects will be initiated following an independent, accredited energy-efficiency assessment to identify and quantify potential savings. Expected savings must be greater than the cost of the work being done in order for the project to be viable and a loan to be awarded; the Green Deal calls this the 'Golden Rule'.

To guard against a shortfall in estimated energy savings, predicted performance will be reduced by a set percentage 'in-use factor' that will vary for each energy-efficiency measure.

The repayments will be paid directly to the Green Deal Provider by the energy supplier over 20 years. The obligation to repay the costs is linked to the energy bill at the property, rather than the individual who initiated the project. If the occupants of the property change, this obligation is transferred to the new bill-paying occupant.

The legal framework for the Green Deal is now in place, which means that Green Deal providers, assessors and installers can prepare for delivery by becoming authorised and displaying the Green Deal Quality Mark.

Extra financial help is available for the most vulnerable and hardest to treat homes through the Energy Company Obligation (ECO), where the cost of the energy-efficiency work may fall short of the 'Golden Rule'.

After that, the Green Deal and ECO funding will be the main financial mechanism for energy-efficiency schemes, supplemented by renewable-energy renewable schemes such as the Feed in Tariff (FITs) and Renewable Heat Incentive (RHI). But customers will not be able to use the expected future revenue from FITs or RHI to count as savings for the purposes of meeting the Golden Rule.

Ener-G Controls, Green Deal, Golden Rule
Potentially any energy-saving measure can be a Green Deal measure.

The Energy Act 2011 makes clear that the Green Deal may cover measures which generate renewable energy in a cost-effective way, as well as those more commonly considered as energy-efficiency measures. As such, it includes a broad range of interventions, including insulation, heating, lighting, controls, glazing, micro-generation, heat pumps and also measures for saving hot water measures.

The Green Deal Assessment will recommend only the measures from the approved list that will improve the energy performance of a customer's particular building, recommending a package of measures for the customer to choose from.

The Government says that its list of approved measures will be updated at least annually and that ‘potentially any energy-saving measure can be a Green Deal measure. If a measure saves energy, the potential saving can be quantified (and verified), and the performance is then “modelled” in our assessment tool(s), it can be added to the list of Green Deal measures.’

Customers can also select measures that will only partially pay for themselves over the lifetime by agreeing to contribute to the cost. or using other means of financing the installation (including the ECO).

Detail is still emerging on the Green Deal, and the jury is still out on whether it will deliver the promised revolution. But there is nothing new about the concept of pay-as-you-save access to energy-saving technologies.

Private-sector providers of energy services and technology have been offering their own version of the Green Deal for many years.

This model was introduced by Ener-G more than a decade ago when it launched guaranteed-savings contracts on combined heat and power. The scheme is still in operation and also applies to Ener-G's building controls and other technologies. It means that there is no upfront investment required by the customer.

In the case of combined heat and power, payment is recovered through purchase of the generated heat and electricity at a discounted rate, while other contracts recover funding through the savings achieved.

Gary Dowsett is Director of Ener-G Controls, part of the Ener-G group of companies.

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