Few would dispute that improvements to the energy efficiency of British homes through the green deal have been slower than predicted. Although 71,000 households have had assessments under the government's flagship programme, consumers have been reluctant to sign up to green deal loans.
Part of the problem has been in delays setting up the mechanics of the initiative: the Green Deal Finance Company (GDFC), which governs the loans, took longer than expected to be set up and energy suppliers have been slow to implement changes to their systems.
Greg Barker, minister at the Department of Energy and Climate Change (Decc), believes there are positives: "It is still early days for the new green deal market. There is clearly growing consumer interest, but, crucially, assessments are also inspiring action." According to Barker, 80% of assessed households plan to carry out at least one energy-saving improvement – and this is borne out by the 173,000 low-income households that have benefitted from free upgrades via the energy companies obligation (Eco).
However, David Symons, at environmental consultancy WSP, says the government has to "up the ante" to make the scheme a success."We've hit a plateau of around 13,000 homes entering the green deal process every month, which isn't anywhere near enough to make it the transformative programme it could be. This is something we all want to happen."
While there might be a big debate about how best to plug the UK's draughty housing stock, there is no doubt it needs to be done: a quarter of the UK's carbon emissions comes from domestic housing and this will have to be reduced drastically if international targets (to reduce the world's carbon emissions by 50% by 2050) are to be met.
There is political support for home-improvement schemes – the rising cost of energy bills is an increasing concern for the electorate, particularly for the millions who are living in fuel poverty. So what has gone wrong with the green deal – and can it be put right?
Teething troubles
"The demand forecasts [for the green deal] had been hopelessly optimistic," says Ben Warren, environmental finance leader at consultants Ernst & Young. "This is down to the complexity of the scheme, but also the cost of borrowing."
Under the green deal, loans are offered by private companies then bought by the GDFC. But the need for companies to make a commercial return, as well as for householders to receive a net saving on their fuel bills, has meant the loans are complex (they can be linked to a property for 25 years).
Because green deal loans are linked to a property, the most obvious comparison is to mortgage rates – which are hovering at around a quarter of the 8% annual percentage return (APR) attached to green deal loans. Compare green deal loans to other personal loans on the market, however, and the comparison becomes much more favourable, according to Decc: "Green deal payment plans are typically the cheapest on the market for medium-size loans, given reasonable expectations for increases in interest rates over the long term."
This means that millions of people who are not about to move house (and thus take out a new mortgage) or who cannot access mortgage-related improvement loans could still benefit from a green deal improvement. Over the period of the long-term loan, the green deal is calibrated to lower energy bills and deliver a net-cost saving – or at the very least to leave the household no worse off.
A question of timing
Can take-up rates be expected to increase as we head into the winter months? Most of the companies that are planning to offer deals have yet to make a big marketing push because few householders think about buying insulation during the summer – which, this year, was also unexpectedly hot. A warm start to autumn has further delayed people's thoughts from turning to the cost of their winter fuel bills – the biggest factor in encouraging investment in insulation, new boilers and other energy-saving improvements.
But Warren is sceptical about the whole scheme. "The lack of take-up raises questions about whether the Green Deal Finance Company was ever a sensible intervention for government to make. You can't help but wonder, could the millions of pounds that the government has spent on set-up and administration costs, and the hundreds of millions of pounds of funds allocated to the GDFC by the Green Investment Bank, have been better managed?"
Warren's concerns are shared by some in the House of Commons, where a cross-party group of MPs has roundly criticised the scheme. "Financially, the green deal is unattractive and uncompetitive, it is overly complicated and it doesn't work for social-housing organisations," said the all-party parliamentary group (APPG) for excellence in the built environment.
The group also found that "there is currently little financial incentive for households" to improve the energy efficiency of their homes, and pointed to the surveying industry's slow take-up of energy efficiency as a factor in house prices.
The Department of Energy and Climate Change estimates that making a house more energy efficient could increase its value by between 14% and 38%, which should be enough to encourage people to make improvements to their home. However, the Royal Institution of Chartered Surveyors, does not routinely grant energy-efficient homes a higher valuation because, it says, there is no clear evidence that energy efficiency "is as yet a significant factor in property valuation".
Marketing
Symons says marketing of the green deal to consumers has been inadequate. He told the Guardian: "The tiny sum spent on promoting green deal means most households haven't even heard of the scheme, let alone have any concern about its long-term future."
He added: "Anything that increases the current rate of progress on the green deal – be that by more promotion, changing the green deal or replacing it altogether – is a good thing. What's important, however, is that any changes don't bring further delay."
Eco – friendly and free energy-saving scheme
The Energy Company Obligation (Eco) is designed to support low-income households and communities, and subsidise hard-to-treat cavity and solid wall insulation. It does this by funding energy efficiency improvements worth around £1.3bn a year.
The Department of Energy and Climate Change says Eco should help about 400,000 households each year, around 230,000 of which will be low-income, vulnerable or in deprived areas.
If one householder receives certain benefits, that home becomes eligible for free loft insulation, cavity-wall insulation or a new boiler via Eco. Recipients of state pension credit are also eligible for the scheme.
You may be eligible if: your income is less than £15,860 a year and you get child tax credit; or your income is less than £15,860 and you get working tax credit (or are on income support, income-based jobseeker's allowance or income-related employment and support allowance) and you're also either responsible for a child under the age of 16, you get disabled child premium, disability premium, pensioner premium, or you are aged 60 or over.
The Energy Saving Advice Service will guide you through the process for nothing more than the price of a national call on 0300 123 1234.
Rebecca Smithers
