The Green Deal is a new government initiative that aims to encourage consumers to make their homes more energy efficient, without having to fork out money up front.From October 2012 you will be able to get finance of up to £10,000 to help pay for energy saving measures. It is a market product that you can choose to take out, it is not a government grant and is not supported with money from government.
It means that rather than having to dip into your savings or take out loans to install insulation, solid wall insulation, double glazing or maybe a new boiler, you can take out long-term finance that will be attached to your home.
Many of the details are still being worked out as the government develops its plans. Solar panels might be available in Green Deal packages too, but that is not yet clear. You may be able to get the Green Deal from an energy supplier, a supermarket, or another provider.
How will the Green Deal work?
The energy saving measures will be installed by companies after a home visit from an accredited ‘Green Deal’ assessor. The assessor will examine your property and recommend the best home improvements to allow you to minimise bills. If you are interested a Green Deal provider will offer you a quote for a Green Deal plan.
The government is keen to stress that the Green Deal is not a ‘loan’ in the traditional sense. In theory you never pay back more money than you are saving on your energy bills each month – what the Department for Energy and Climate Change calls the ‘Golden Rule.’
The Golden Rule states that if your new insulation saves you £15 per month on your heating bills, for example, you’ll pay less than £15 in repayments. But the Golden Rule does not actually guarantee savings, it is only an estimate based on assumptions. This means that you could be in a ‘break-even’ situation for many years with no actual net benefit.
We are also concerned that the savings will not add up for some consumers because the repayments could be too high to meet the Golden Rule for the more expensive measures.
The Green Deal does not work like a personal loan – it is attached to your home rather than to you, so it will be passed on to the new owner when you sell your house. But this could also be a concern for consumers, as there’s uncertainty about whether the new owner will want to take on a house with a Green Deal charge attached to it.
Interest on Green Deal loans
Our research this year showed that energy prices are the number one financial concern for consumers, and investing in energy efficiency measures, such as insulation, can be a quick and simple way to reduce rising energy costs. However, there are still some problems with the deal that could end up leaving consumers confused or out of pocket if the savings don’t add up.
The Green Deal money isn’t free – consumers will have to pay interest on the amount they borrow. We also don’t know what the interest rates will be yet, but they will be regulated in some way.
So what’s wrong with the Green Deal?
We’re worried that the current plans for the Green Deal don’t give consumers enough protection. We want to make sure that the government considers the needs of ordinary people when they are drawing up their plans.
Discussions on what the Green Deal is show there is a lot of confusion about what the Green Deal is and how it will affect people.
There’s also a lot of scepticism about how beneficial it will be, given that the scheme may allow companies to work as both assessors and providers of energy saving measures. Many consumers are rightly nervous about companies who may take advantage of their ‘assessor’ status to recommend their own products.