The Green Deal: watching brief - Energy and Climate Change Contents


1  Introduction

1.  The Green Deal is the Government's flagship initiative to help households and businesses increase their energy efficiency. The policy has formed a central part of the Coalition's commitment to be the "greenest government ever" and has been frequently cited by the Prime Minister and Deputy Prime Minister (as well as DECC Ministers) as one of the main ways in which the Government is helping households to tackle rising energy bills.[1] For example, Mr Cameron recently told the Liaison Committee:

I do support further steps on energy efficiency and the green deal is an enormous commitment by the Government to help bring that about. In most areas of policy, politicians are accused of making too many speeches and not actually doing anything. I think in this area of policy, we've got the opposite problem. We have actually got, as I hope I have described, a very aggressive, very progressive, very forward-looking green energy policy.[2]

2.  As a committee, we have consistently stressed the importance of improving energy efficiency.[3] Greater efficiency will bring benefits for energy security and affordability as well as helping to reduce carbon emissions. As such, it is truly a "no regrets" option.

3.  During our inquiry into consumer engagement with energy markets, we raised concerns that there were a number of barriers to uptake of the Green Deal that DECC had failed to address adequately. We were also worried that the Minister was not able to give us a clear response when we asked what criteria DECC would use to monitor the success of the Green Deal.[4] As a result, we launched this inquiry into the Green Deal with the intention of monitoring the progress of the Green Deal as it is rolled out; to assess whether its core aims are being met, and to identify any opportunities to make improvements in the future if necessary (or indeed to offer praise, should expectations be exceeded). In this report, we hope to help clarify what a successful roll out would look like and to identify key elements that will contribute to success. It is our intention to return to these indicators in future to examine how well the scheme is progressing. This will be done in the spirit of trying to maximise the efficacy of the Green Deal, since its overall aim—to improve energy efficiency in homes and businesses—is one that we very much support.

4.  We launched our inquiry on 6 December 2012 and received 34 submissions of evidence. We also held two oral evidence sessions. A full list of witnesses can be found at the end of this report.[5] We are very grateful to all those who have contributed towards this inquiry.

Box 1: What are the Green Deal and ECO?


The Green Deal
The Green Deal is a market-led framework that is intended to allow individuals and businesses to make energy efficiency improvements to their buildings at no upfront cost. The costs will be repaid in instalments through the electricity bill for the property.

The Golden Rule
The ‘Golden Rule’ of the Green Deal states that the expected financial savings must be equal to or greater than the costs attached to the energy bill. In practice, this means that repayments should be no more than what a typical household should save in energy costs.

How it works
There are five stages to the Green Deal process:
1. Assessment – a registered Green Deal Assessor visits the property and surveys energy usage and options for energy efficiency improvements.
2. The Assessor recommends appropriate improvements and indicates whether they would be expected to pay for themselves through reduced energy bills.
3. Green Deal Providers give quotes for a Green Deal Plan, which include the work to be done and the repayment plan.
4. The Provider arranges for improvements to be made by a Green Deal Installer.
5. Green Deal repayments are automatically added to the electricity bill for the home.

Energy Companies Obligation (ECO)
The ECO is a subsidy from energy suppliers that works alongside the Green Deal to provide energy-saving improvements for those people who are most in need and for properties that are harder to treat.

How it works
Energy companies have three obligations under the ECO:
1. an Affordable Warmth Obligation, to deliver a total of £4.2 bn savings on energy bills for consumers living in private tenure properties that receive particular means-tested benefits;
2. a Carbon Saving Obligation, to deliver total carbon savings of 20.9 MtCO2 through the installation of measures like solid wall and hard-to-treat cavity wall insulation, which ordinarily can’t be financed solely through the Green Deal; and
3. a Carbon Saving Community Obligation, to deliver total carbon savings of 6.9MtCO2 through the installation of insulation measures in households in specified areas of low income, including hard-to-reach low-income households in rural areas.

The costs of ECO will be passed on to all energy consumers on their energy bills.

Green Deal and ECO interaction
It is intended that the two schemes will overlap as follows:


 



1   HM Government, The Coalition: our programme for government, May 2010;

See for example, David Cameron Green Economy speech, available at: http://www.businessgreen.com/bg/news/2241323/camerons-green-economy-speech-in-full; Nick Clegg's speech on the green economy, 23 May 2011, available at: http://www.libdems.org.uk/speeches_detail.aspx?title=Nick_Clegg%E2%80%99s_speech_on_the_green_economy&pPK=0e1da756-bb98-489e-9e72-d97c95a0715b

See, for example, DECC press release, Policies are putting a cushion between energy prices and household bills - Davey, 27 March 2013 Back

2   House of Commons Liaison Committee, Oral evidence from the Prime Minister, Tuesday 11 December 2012, HC 484-ii and -iii, Q 135 Back

3   For example, see House of Commons Energy and Climate Change Committee, Eighth Report of Session 2010-12, UK Energy Supply: Security or Independence?, HC 1065; House of Commons Energy and Climate Change Committee, First Report of Session 2012-13, Draft Energy Bill: Pre-legislative Scrutiny, HC 275-I Back

4   House of Commons Energy and Climate Change Committee, Fifth Report of Session 2012-13, Consumer Engagement with Energy Markets, HC 554-I, para 100 Back

5   Page number 29 Back


 
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Prepared 22 May 2013