The much trumpeted Green Deal is supposed to start in 2013 for those ” able to pay” home-owners who live in solid wall homes which are difficult to heat efficiently or affordably. The driving force is to try to lower carbon emissions and meet the UK’s self imposed carbon saving targets which are more stringent than our internationally agreed reductions. Unfortunately,unless drastically amended, the current proposals are doomed to failure.
No Financial Incentive = No Action
The proposed plans are based around a low interest loan from the private sector tied to the property and running for up to 25 years . The spin merchants state that the repayments are not paid by the home-owner but are fundedby the savings from lower heating useage and no annual repayments will be higher than the bill savings.
This sounds great until you realise the put upon home-owner will pay the same high heating costs as before and the actual bill savings go to the lender to meet the loan repayments. There is no gain whatsoever for the homeowner so why put up with the work being done ? All that will happen is that a small number of home-owners who can fully fund the work will benefit as is the current staus quo.
Charge Against the Property
To try and make the bill savings cover the loan installments the proposals are to spread the loan over as many as 25 years and legally bind the home-owner to repaying the loan by putting a charge on the house itself. This has several major drawbacks that occur when the house changes hands or when any conversion or extensions are added.
House sales are very slow as it is, without forcing new owners to take on added loan debt from a Green Deal Loan. The new owners may want to remove the insulation and use an alternate energy source for example. Or they may decide to build an extension covering two external walls so why pay higher energy bills for something they are not benefitting from.
The Figures Don’t Add Up
The size of the loan is limited by the amount of annual bill savings spread over a maximum of 25 years so that all the repayment is covered by the “bill saving”. Unfortunately the use of the private sector who need to charge a commercial interest rate – albeit considerably less than the average loan rate – means that at best around half the cost will be covered by the loan with the rest from the home-owner. Remember as well there is no net financial gain for the home-owner.
Example Cost & Repayment
Average cost of External insulation for a 3 bed semi is £10,000
25 yr Loan at 7%pa total repaid £20,000
Total annual loan repayment £800
Energy Saving Trust bill savings pa £400
Net result is the loan will cover half the costs at best so clearly the current funding proposal is a definite non-starter .
What’s the Answer ?
A complete re-think is needed if the great British public are to be persuaded to take up external insulation in the vast numbers the Government believes necessary to hit our carbon reduction targets.
Any scheme needs to have a decent payback term and be coupled with genuine real- time reductions in heating bills or the initial cost should be subsidised by the Energy Companies with an increase in property values to reflect the lower running costs.
A good starting point would be to look at the hugely successful re-launch of solar roof panels that has been witnessed since the introduction of the Feed- In tariff. This scheme sees the home-owner get lower energy bills, re-coup their outlay in around 12.5 years and then get a pure profit of 8% a year for the next 12.5 years !