Getting a good deal from the Green Deal

The Green Deal is the government's new scheme to encourage insulation and other energy efficiency measures in the UK housing stock (commercial properties to follow soon). The scheme is complex and has been a long time coming; at least the details are finalised and the scheme lauched but it has been heavily criticised for being too expensive for most people to use - for example by Fiona Harvey in the Guardian. However, that is not quite true, when you consider the grants available through the Energy Company Obligation, some of which are available to anyone living in an eligible property with no means testing involved.


There are two main parts to the Green Deal:

• The Green Deal assessment gets you an EPC (Energy Performance Certificate) for your house plus a recommendation of measures you can take which will be cost effective for you, taking into account your personal circumstances and lifestyle (for example how much time you spend at home, what temperature you set the thermostat and so on).
• Green Deal financing is a way of paying for these measures through a loan which you pay through your electricity bill.

There is a golden rule which is that to get green deal financing the expected savings on the measures you take must be greater than the cost of your loan. The problem with this is that, leaving aside cavity wall insulation and loft insulation, most improvements are expensive. For example if you have solid walls insulating them externally, which is usually preferred, is likely to cost around £10,000 and save you £500/year (from the Energy Saving Trust advice page). Ignoring inflation that is a 5% payback per year. The cost of a Green Deal loan however will be at least 7% (see here for Green Deal Finance Company interest rates). Unless your savings are much higher than the EST estimate, there is no way that you can meet the golden rule and get a Green Deal loan for this. Even with the early bird cashback scheme which gives you £650 for solid wall insulation the loan will be too expensive.

There are two ways around this - firstly you may be able to get a cheaper loan elsewhere. The Green Deal loan is effectively an unsecured loan and you would do better getting a mortgage or possibly another personal loan. Better still, if your home has solid walls you can almost certainly qualify for a grant through the Energy Companies Obligation (ECO). This has replaced various older schemes such as CERT and requires the big energy companies to save carbon emissions by helping householders save energy. Some of this is targeted at people on benefits but not all; in particular, houses with solid walls, or hard to treat narrow cavity walls, will qualify. If the ECO grant covers half the cost, your 5% payback per year becomes 10% and will qualify for the golden rule so you could get a Green Deal loan for the rest - or another cheaper loan if you can.

I don't want to recommend any particular installers but a quick search for 'eco grant external wall insulation' found quite a few, some offering free insulation, some more cagey about the size of the grant.

Even ignoring the loan system, the Green Deal is a big step forward for helping people improve their houses. The training for Green deal assessors is more rigorous than for the old EPCs and the installers have to show competence and quality control to get PAS 2030 certification. This accreditation requires annual checks. I am sure there will still be cowboys but they will need to be more sneaky and make a lot more effort to get through. There will also be some companies charging more than others so do shop around.

Finally, the Green Deal is not just for home owners - it is for tenants too. The time is coming when landlords will need to ensure their properties meet a minimum energy efficiency standard and must agree to any reasonable request from a tenant for Green Deal measures (The Green Deal Guide for residential landlords).

The Green Deal isn't perfect but let's not dismiss it altogether: in combination with the ECO it could help thousands of people keep warm with less worry about bills - and lowering our energy demand improves our energy security (see my last post Energy crunch time for the UK) and reduces carbon emissions.