Under the Green Deal, bill payers will be able to benefit from energy efficiency improvements without having to front up the cash. Instead, businesses will provide the capital, getting their money back via the energy bill. Andrew Warren is upbeat about the Green Deal's prospects.
Legislation has just gone through the House of Commons which gets around one of the barriers [to investing in energy saving measures] - people not wanting to make longer term investments into buildings because they are not sure they are going to be there for the lifetime of the measures that they would be investing in.
What the Green Deal does is to say 'you take out these measures to improve the building in question, but the charge on the loan that you take out will be based upon the building rather than the individual'. So you don't take the debt with you; it stays with the building.
It is not a question of having to find the necessary money out of core resources or current revenue. Essentially, you borrow against the acknowledged value of the building and the likely reductions in the fuel bill.
Indeed, there is a 'golden rule' which says that you can only borrow against things which, in due course (15, 20, 25 years), will show a reduction in the fuel bill. It is a very simple concept. However, there have had to be changes in the way, for instance, we estimate the value of a building in energy efficiency terms. The idea is that an Energy Performance Certificate [which contains information on a building's energy use and carbon dioxide emissions and a report with suggestions to reduce energy use and CO2
emissions] has a real value in terms of its consistency.
If, for example, a building is assessed to be C-rated then a C-rated building it is. It's not a question of being able to head around the corner and see whether you can get a better deal elsewhere.
We have to have the same confidence in the rating system as we do when we go out and buy, say, a refrigerator or washing machine. We have had energy ratings on [white goods] for a long while and we have basically knocked the bad refrigerators and washing machines off the market as a result.
I have been asked by the Government to look at the nudges and the triggers that might get people moving on [energy efficiency].
The sticks include a decision that has already been taken that you will not be able to lease a building which is F or G rated. That is to try to ensure that the best landlords [those with A and B rated properties] benefit. However, there are also carrots... The boiler scrappage scheme was successful, but was a finite scheme in England. Interestingly, the present Scottish administration is committing to carry the scheme on through its entire period of office and I think this is something that we are definitely looking at getting going again right across Britain.
A second carrot is the Landlord's Energy Saving Alliance (which provides individual private landlords relief on capital expenditure on insulation). [This will help] landlords [who] are required to upgrade their gas guzzling buildings in order to be able to lease them out.
In Budget 2011 a commitment was made that said before the Green Deal gets started we will introduce new incentives to encourage people to get involved. The obvious time to do that is next spring with Budget 2012.
The Green Deal in brief
The Green Deal is essentially a framework to enable private firms to offer consumers energy efficiency improvements to their homes, community spaces and businesses at no upfront cost, and recoup payments through a charge in instalments on the energy bill.
At the heart of the proposals is the 'Green Deal plan', a financing mechanism that allows consumers to pay back through their energy bills. This means consumers can see the Green Deal charge alongside the reductions in energy use which generate savings on their bill. It also means that if they move out and cease to be the bill-payer at that property, the financial obligation doesn't move with them, but moves to the next bill payer.
So the bill payer is not liable for the full capital cost of the measures, only the charges due while they are the bill payer.
• Andrew Warren is director of the Association for the Conservation of Energy. Last autumn, he was appointed by the Department of Energy and Climate Change to chair the Green Deal Advisory Forum on Maximising Energy Efficiency in Buildings. This is an edited extract of a speech he gave at Trane's 'High Performance Buildings' event in London in September.