Dealing in energy efficiency

Green deal assessor John Barwise provides his low-down on the government's flagship energy-efficiency scheme

According to Decc, carbon emissions from homes and workplaces need to fall by 29% and 13% respectively if the UK is to meet its legally-binding carbon budgets – which require UK emissions to be cut by 34% by 2020.

Analysis by the government suggests that the country could save 196TWh of energy by the end of the decade through cost-effective investment in efficiency measures, saving around 41 million tonnes of carbon dioxide.

The government’s flagship policy, the green deal, which opened for business at the start of the year, has to work to help secure such savings, but will it?

Stemming the leaks

The green deal is a key element of the Energy Act 2011 and part of the UK’s response to the recently updated Energy Performance of Buildings Directive (2010/31/EU), which requires all EU member states to improve the efficiency of their building stock. The green deal was officially launched on 1 October 2012 and became operational on 28 January 2013.

Under the scheme, finance is available to install a range of energy-saving measures in domestic properties.

There are no upfront costs to customers, the loan is attached to the property not the consumer, and a so-called “golden rule” principle has been put in place that ensures the cost of installing the suggested measures is less than – or, at least no more than – the savings made on energy bills over the lifetime of the loan.

Financial packages to pay for the installation of the energy-efficiency measures are offered by green deal providers.

There are currently 45 improvement measures that can be financed through the green deal and more will be available as new products become approved. The categories include:

• Heating, ventilation and air conditioning – condensing boilers, underfloor heating, heat recovery, mechanical ventilation, flue gas recovery.
• Building fabric – cavity wall insulation, loft and internal/external wall insulation, floor insulation and energy-efficient glazing.
• Lighting – fittings and controls (energy-saving lights are not available under the domestic green deal).
• Water heating, water-efficient taps and showers, and innovative hot-water systems.
• Microgeneration – ground and air-source heat pumps, solar thermal and photovoltaic panels, biomass boilers and micro combined heat and power systems.

A new energy company obligation (ECO) provides additional subsidies for properties that are hard to treat and do not meet the golden rule because the cost of installing various measures is higher than the likely financial savings in energy bills. Older properties are likely to benefit most from the ECO, particularly in rural areas, which tend to have higher heating costs than newer houses in urban areas.

The ECO is financed through a general levy on all customers’ fuel bills, similar to the carbon emissions reduction target (CERT) and the community energy saving programme (CESP), which expired in December 2012.

The total funding available through ECO will be £1.3 billion a year; much less than the £2.4 billion previously available through CERT and CESP. Most of the subsidy on offer is likely to finance insulation measures, including solid wall insulation, loft and cavity wall insulation and heating systems.

Quality control

Only those providers, assessors and installers meeting quality control standards can deliver green deal services and display the scheme’s quality mark. This approach aims to provide assurance that the energy assessment, the energy-saving products and the installation process will be carried out to the highest professional standards.

The green deal oversight body manages the authorisation scheme and maintains a register of approved providers, certification bodies, advisers and installers. The main players in the green deal include:

• Assessors survey properties and produce a green deal advice report (GDAR) based on the energy performance of the building and the actual use of energy by the occupiers. The GDAR will set out various options for improving energy efficiency that qualify under scheme.
• Advisers are the organisations through which assessors work. Only UKAS-accredited organisations can certify green deal advisers and installers.
• Providers are the firms offering customers a green deal finance package to pay for the costs of installing various measures as recommended in the GDAR.
• Electricity suppliers collect payments through electricity bills under a green deal arrangement agreement with the provider. Payments are passed to the provider on a proportionate basis over the life cycle of the scheme. The repayment plan stays with the property not the customer.
• Installers are responsible for installing energy-efficient measures and systems. Installers must be certified as meeting PAS 2030 by a green deal accredited certification body.

Decc reported in March that 40 firms had been authorised as providers and that a further 629 were registered to carry out installations. At the same time, 619 individuals were registered to offer assessments.

Non-domestic buildings

The green deal works in much the same way for commercial properties as it does for domestic ones. However, commercial properties are more varied in building types and occupancy criteria, which may have an impact on the upper finance limits and the terms under which schemes are implemented.

The assessment process is also more complex for commercial properties. While domestic properties are assessed against standard assessment procedures to deliver an energy performance certificate (EPC), commercial properties are assessed against the simplified building energy model, which will generate a commercial EPC.

Commercial green deal arrangements include occupancy as part of the assessment, and assessors need to undertake occupancy assessment training to become certified as non-domestic energy assessors under the scheme.

All the energy-saving measures available for domestic properties under the green deal are available to commercial properties, and there are also some additions, such as low-energy lighting, air-conditioning systems and water dispensers. The government has said it will create more flexibility in the non-domestic sector by allowing for specialist assessments to provide more detailed savings plans.

Money, money, money

One problem for commercial properties at the moment is the reluctance on the part of providers to fund commercial green deals.

The Green Deal Finance Company (GDFC) is a not-for-profit consortium with more than 50 members, including energy suppliers, manufacturers, distributors, local authorities and others. It was set up to be the main source of funding for green deal providers.

In March, the GDFC announced a £244 million funding package for the setting up, financing and administration of green deal plans. But while the GDFC provides finance for domestic schemes, it has so far declined to finance the commercial element of the green deal.

A spokesperson for the company told the environmentalist: “Our focus is on financing plans for domestic bill payers. As a result, the GDFC has no current finance options for commercial properties and has no plans to do so in 2013.”

Finance for commercial properties under the green deal is more complicated than for domestic properties. The range of energy-saving measures is more extensive and potentially more expensive to install on an industrial scale, which may deter many businesses from taking advantage of the scheme even though the golden rule still applies.

On a more positive note, non-domestic customers may see additional benefits in installing energy-saving measures alongside cutting energy bills, such as reducing the costs of the complying with the carbon reduction commitment energy efficiency scheme.

Energy solution?

It is too early to say whether the green deal can deliver the energy and carbon savings the government hopes for in the long term. Data from Decc, which were released on 15 March, reveal that there were 1,803 green deal assessments in the first month of the scheme.

But there remains a question mark over whether it will have an impact on even a small proportion of the 26 million homes that could benefit from improved energy efficiency. And, partly owing to the limited finance currently available from providers, it is unlikely that owners of the 1.8 million non-domestic buildings in the UK will use the green deal in the numbers needed to cut emissions in line with the country’s carbon budgets.

The government is currently offering cashbacks to early domestic green deal takers – a total of £125 million is available – and says it expects the scheme to build up over time as property owners, both domestic and commercial, become more aware of cost savings that may be available. However, it could be that alternative funding mechanisms will be more attractive to the owners of non-domestic properties.

The Royal Bank of Scotland, for example, launched a £200 million carbon reduction fund in December 2012, which will soon offer finance for a range of sustainable energy projects, including retrofitting commercial buildings with more energy efficient heating and lighting. Funding is also available through the green investment bank for non-domestic energy-efficiency projects.

Nonetheless, if emissions from homes and workplaces are to be reduced sufficiently to meet the UK’s 2020 target, time is of the essence and the financial barriers associated with the green deal must be overcome speedily.