Learning from the past - The Green Deal
Pay as you save energy efficiency
The Green Deal was a Government-backed ‘pay as you save’ policy that existed between 2013 and 2015.
The concept was simple: people would install energy-saving measures in their homes by taking out a ‘Green Deal Loan’, which remained attached to the house. People paid nothing up front on the expectation that they – and future residents of that home – would pay the loan back via savings realised in their energy bills.
The WMCA could develop a similar policy, but there were a number of faults in the implementation of the original that we need to learn from (22):
Demand: people did not want the energy saving measures that they needed the most – notably internal and external solid wall insulation. Both measures are disruptive to home life, with long payback times, and were not well understood by homeowners, who had been ‘sold’ the Green Deal based on financial savings rather than thermal comfort. Furthermore, the least efficient homes tended to be in private ownership making it hard to treat multiple properties at once – for example, an entire terrace. This suggests that demand for these measures will need to be stimulated via incentives, regulation, or a combination of the two.
Finance: demand for Green Deal Loans was suppressed by being more expensive (23) than other comparable forms of borrowing. For people who could access credit, it was more cost effective to extend a mortgage, or to take out a secured loan.
Value for money: the Green Deal Finance Company invested £25m in its setup costs to service activity that was never undertaken, and the Department for Energy and Climate Change (DECC) did not have voting rights on its board (so could not stop this). Being able to start small and scale with demand is key to realising value for money.
Data: it was hard to measure progress on key objectives like fuel poverty because DECC did not have access to the right data – notably on household income. It was also tricky to blend Green Deal measures with existing fuel poverty support.
Crucially, succeeding at delivering energy efficiency at scale will mean that the region will need to be able to pool different kinds of support and investment and set its own definition of what success looks like.
(22). View the Public Accounts Committee
(23). Interest rates on Green Deal Loans were between 7% and 10%.