Is the ‘Green Deal’ a Good Deal for Energy Consumers?

Yesterday morning the government launched it’s new Green Deal scheme.  Similar in purpose to the energy efficiency schemes that were used by local authorities and energy companies, the Green Deal aims to help people make their homes more energy efficient using government funding.  Unlike those schemes, which were presented to consumers as a grant, the Green Deal is a long-term loan sold and run by the government at a surprisingly high interest rate.

Why are the Government doing it?

The principal is certainly a strong one; by helping the British populace make their homes more energy efficient now, less energy will be required in the future, helping the government meet it’s long-term green goals.

The UK is generally viewed as having an ‘old’ stock of buildings and commercial properties – which are less energy efficient than a newer house, as they often lack loft insulation, double glazing and other more-commonplace energy-saving features of modern housing construction. Overall, the benefit is threefold:  lower carbon emissions, keep people warm, and make energy affordable.

How it Works

Running in England, Wales and Scotland, ministers say the Green Deal’s aim is to l help thousands “stay warm for less”. The scheme will rely on those willing to be involved taking the first step applying online to be visited by an assessor.

The government has already selected a list of Approved Green Deal installers, such as energy companies or DIY chains, who will visit homes who have applied to be part of the scheme and advise property owners what they could do to improve their home’s energy efficiency – e.g. new boilers, windows and insulation.

This is carried out at no upfront cost to the homeowner, who can pick and choose what thy would like carried out, and then pay for the improvements by taking out a finance agreement with the Green Deal Finance Company, a non-profit making organisation backed by the government.

However, critics have already asked whether the interest rate provided by the Green Deal Finance Company – a maximum of 6.92%.

Is it a Good Deal?

“There’s a good chance that you will make savings,” said Paul Reeve, of the Electrical Contractors’ Association.

Mr Reeve said it was possible, but unlikely, that consumers could end up out of pocket.

“Many of us believe that energy prices will continue to rise over the coming years. If that’s true, people who’ve taken on the Green Deal will generally feel a lot better off,” he explained.

Mr. Reeve’s concerns echo that of the government, who say that whilst their interest is higher than the base rate, it is fixed for 20 years and is competitive to the rate you’d find in any high street store, making it a great option to prepare for higher energy bills before they arrive.

Homeowners will also be expected to foot a £63 set-up charge, and a £20 a year annual fee, meaning that – including the fees and interest – a £5,000 Green Deal loan over 20 years could cost up to £9,710.

Government representatives have also hinted at a cash back scheme to encourage those who sign up, whilst nothing concrete has been laid out, a government spokesman said, “The more work households decide to have done, the more cash they could receive. Some packages could be worth over £1,000,”

The scheme would certainly seem to be a good deal for anyone planning on having work undertaken anyway, and finds the fixed interest rate and maintenance fees comparable or better to what they’ve been offered by their contractors or private finance arrangements.