The Green Deal and Energy Company Obligation Consultation

On 23rd November, DECC launched the consultation on its flagship Green Deal Policy. The Green Deal is scheduled to be launched in autumn 2012 and has been designed to overcome the barrier of upfront cost to uptake of energy efficiency measures by the UK’s homes and businesses. It consists of a mechanism allowing private finance to provide the upfront capital required for installation of measures in the form of a loan to the property. This loan is then re-paid by the consumer via savings made on the energy bill.

A pivotal element of the Green Deal Policy is the Golden Rule which sets the amount of Green Deal Finance that can be borrowed. It operates on a principle that the total amount borrowed via the Green Deal Finance mechanism must be less or equal to the expected savings made on the energy bill. If the package of measures which a consumer wants to install does not meet the Golden Rule, they can however part-pay the difference.

Alongside the Green Deal, a new Energy Company Obligation (ECO) will be introduced. It is proposed that the ECO will provide around £1.3 billion per year of extra help where it is needed, namely for the fuel poor (affordable warmth) and a discount for less cost effective energy efficiency measures (Solid Wall Insulation) which don’t fully qualify under the Green Deal as they do not meet the Golden Rule.

The Green Deal will enable many households and businesses to improve the energy efficiency of their properties without consuming so much energy and wasting so much money.

A quarter of the UK’s carbon emissions comes from the energy used in homes and a similar amount comes from our businesses, industry and workplaces. The UK government's target is to reduce those emissions by 2050.

Green Deal is a new government initiative designed to help meet the upfront cost of making your home more energy efficient. Due to be launched in late 2012, the Green Deal will allow you to install energy efficiency measures and pay for the improvements with the savings on your fuel bill. Although you will repay the cost over time, this is not a conventional personal loan as the charge is attached to the meter and paid back through your fuel bill. If you move out, the idea is that the new occupant will pick up the charge while also benefiting from a more energy efficient property.

The scheme will also help the most vulnerable and will help deliver major measures, such as solid wall insulation, in homes which need more work than Green Deal finance alone can stretch to.

Visit Decc's website here to find out more about the Green Deal.