Introduction to the Green Deal
In January 2017 Greenstone Finance and Aurium Capital Markets acquired the business and assets of the Green Deal Finance Company Ltd (GDFC). Financing of new Green Deal loans recently commenced through a select number of Green Deal Providers for the first time since July 2015.
The below article is now archived meaning that the information and figures included may be dated and incorrect, please visit www.gdfc.co.uk for up to date information.
The Green Deal is a finance mechanism to enable people to make improvements to the energy efficiency of their house without having to bear the up-front cost.
At the heart of the green deal is the 'golden rule': as long as the expected financial savings in lower energy bills are equal to or greater than the costs of the energy efficiency measures installed, you are eligible.
The loan to cover installation costs will be in the form of a charge on the property. It will be repaid over a period of 10 - 25 years (depending on what measures are installed) through the property's electricity bill.
DECC has launched another initiative called the Green Deal Home Improvement Fund (GDHIF). This replaces the Green Deal Cashback scheme which closed to new applicants on 30 June 2014. GDHIF pays you back for any qualifying energy efficiency measures providing the measures are recommended in an energy performance certificate and you apply for a voucher before you get the work done. The fund is available whether or not you use the green deal loan scheme.
A complementary initiative, the Energy Company Obligation, is available for vulnerable and hard up individuals, low income communities and homeowners with solid wall or other hard to insulate properties.
The Energy Saving advice line was set up to provide a central point of contact for inquiries about energy saving and questions about the Green Deal. You can phone the Energy Saving Advice Line for the best deals in your area on 0300 123 1234.
How the green deal works
1. An accredited green deal adviser will assess the energy efficiency of the
building, using a system that is based on an improved
energy performance certificate (EPC). They will draw up a list of
measures that can be taken to improve the energy efficiency and indicate which ones meet the golden rule. To find a local green deal advisor, put your postcode into the search box here. (All GDAs must belong to a Green Deal Advice Organisation. They can be independent, or tied to a Green Deal Provider.)
2. Domestic properties will also get a green deal occupancy assessment, which will look at your current energy use, and how that varies from the national average (which is what is used in the EPC calculations). If your use is higher than average you will benefit more than calculated by the golden rule; and if your energy use is lower than average, you will see less benefit. Green deal assessments for non-domestic properties will automatically take current energy use into consideration.
3. You can then invite green deal providers to give you quotes for any of the improvements mentioned on the report that you would like to go ahead with. If you are applying for a green deal plan of £10,000 or more, you must get at least three quotes. (Even if you are not, it makes sense to get three quotes as different providers will offer different products and approaches).
4. If you wish to install measures that don't meet the golden rule you can use the green deal up to the level of estimated savings, and pay the rest yourself.
5. Your chosen supplier(s) installs the measures.
6. The green deal provider arranges for the repayments to be taken through a charge on your energy bill.
The initial interest rate from The Green Deal Finance Company (TGDFC) is 6.96% per year. There will be a start up charge of £63, plus an annual operating charge of £20 payable by the Green Deal Provider (who may well pass it on to customers).
Green Deal Providers will be able to determine their own all-in package which they will offer to consumers. The indicative interest rate for all-in Green Deal Plans (loans) of £5,000 will be between 7.67% (over 25 years) and 7.6% for a 10 year plan. The rate will be higher for smaller loans – for example 9.3% all in for a £1,500 loan over 25 years.
According to TGDFC “rates will be comparable to the best high street rates for long-term unsecured loans. But whilst these are accessible to barely half the population, TGDFC will lend to over 80%.” Whether or not you think this is a good deal will probably depend on your circumstances, and how easily you can access alternative forms of finance.
Make sure you look at the small print, as there are likely be penalty clauses if you want to pay off the loan early.
Improvements that are eligible for green deal finance
The following measures are eligible for the green deal, domestic (D) and non domestic (ND), since its launch in October 2012.
Air source heat pumps (D & ND)
Biomass boilers (D & ND)
Biomass room heaters (with radiators) (D only)
Cavity wall insulation (D & ND)
Chillers (ND only)
Cylinder thermostats (D only)
Draught proofing (D & ND)
External wall insulation systems (D & ND)
Fan-assisted storage heaters (D only)
Flue gas heat recovery devices (D & ND)
Gas-fired condensing boilers (D & ND)
Ground source heat pumps (D & ND)
Heating controls (for wet central heating systems and warm air systems) (D & ND)
Heating ventilation and air conditioning controls (inc. zoning controls) (ND only)
High performance external doors (D & ND)
Hot water controls (inc. timers and temperature control) (ND only)
Hot water cylinder insulation (D & ND)
Hot water showers (efficient) (D & ND)
Hot water systems (efficient) (ND only)
Hot water taps (efficient) (D & ND)
Internal wall insulation (of external walls) systems (D & ND)
Lighting systems, fittings and controls (inc. roof lights, lamps and luminaries) - (ND only)
Loft or rafter insulation (including loft hatch insulation) (D & ND)
Mechanical ventilation with heat recovery (heat recovery can be added to ventilation system) (ND only)
Micro combined heat and power (D & ND)
Micro wind generation (D & ND)
Oil-fired condensing boilers (D & ND)
Photovoltaics (D & ND)
Pipework insulation (D & ND)
Radiant heating (ND only)
Replacement glazing (D & ND)
Roof insulation (D & ND)
Room in roof insulation (D only)
Sealing improvements (inc. duct sealing) (ND only)
Secondary glazing (D & ND)
Solar blinds, shutters and shading devices (ND only)
Solar water heating (D & ND)
Transpired solar collectors (ND only)
Underfloor heating (ND only, but may be added to D at later date)
Underfloor insulation (D & ND)
Variable speed drives for fans and pumps (D & ND)
Warm-air units (D & ND)
Waste water heat recovery devices attached to showers (D)
Water source heat pumps (D & ND)
Many of these measures will not meet the golden rule. However, green deal finance can still be used for some of the upfront cost - up to the level of the estimated savings for those measures in their property. ECO funding is also available for solid wall and hard to treat cavity wall insulation. It is also available for low income and vulnerable people and those in fuel poverty.
Green deal home improvement fund
The green deal home improvement fund (GDHIF) offers the chance to claim money back on a range of energy saving measures you install. Money will be released on a quarterly basis and the funding allocated for solid wall insulation tends to run out very quickly. The next announcement will be in February.
Up to £5,600 is available to households in England and Wales to help with the cost of installing energy saving measures such as solid wall insulation, double glazing, boilers, cavity wall and floor insulation.
In Scotland, £15m was made available for an equivalent scheme launching in June 2014, called the Green Homes Cashback scheme.Domestic energy customers can now receive:
- up to £3,750 for installing solid wall insulation (up to 67% of total cost);
- up to £1,250 for installing two measures from this list:
- a condensing gas boiler on mains gas
- double or triple glazing as a replacement for single glazing
- secondary glazing
- energy efficient replacement external doors
- cavity wall insulation
- floor insulation
- flat-roof insulation
- insulation for a room in the roof
- a replacement warm air unit
- fan-assisted storage heaters
- a waste water heat recovery system
- up to £100 refunded for your Green Deal Assessment (you will only get this if your application is successful);
- up to £500 more if applying within 12 months of buying a new home.
You also need a quote from a GEHIF registered installer or provider for work that is specified on the GDAR or the EPC and included on the list of GDHIF approved measures.
As always, it makes sense to get more than one quote - ideally at least three. Click here for detail of what must be included in the quote.
Landlords will also have to provide proof of ownership.
Voucher payment claims will be accepted from 16th March 2015, with payments for successful claims likely to take up to 20 working days. To submit a voucher claim for payment, you will need to:
- Have the improvements installed by a Green Deal Installer or Provider registered with the scheme;
- Redeem your voucher before it expires via the claims process set out on the terms and conditions. The voucher must be completed and countersigned by the Green Deal Installer or Provider – with copies of the invoice(s) and, if appropriate, the Green Deal Assessment Report invoice
- Have met the scheme’s terms and conditions
You cannot apply for GDHIF if you are already getting money back for the same improvements through other schemes eg the Energy Company Obligation, Green Deal Communities, Green Deal Cashback or the first release of GDHIF.
Landlords and tenants can apply for the scheme provided they are paying for the improvements themselves.
The benefits and pitfalls of the green deal
For the home or business owners or tenants the main benefits are to have warmer, more comfortable buildings, while paying the same (or lower) energy bills, with no up front cost.
For landlords it is to improve their buildings with no upfront cost.
An additional benefit is lower carbon emissions, and this is the main driver for government in developing this scheme. It also wants to improve energy security, mitigate fuel poverty, increase productivity and reduce the costs of meeting the UK's renewable energy target.
Could I end up paying more?
The golden rule is based on average energy use. If you currently use less than the average amount of energy, the savings on your energy bills may be less than estimated in the assessment. It is possible that they will not cover the cost of the repayments, and you will end up with higher bills.
If you currently keep the thermostat low to keep bills down, then installing energy efficiency measures means that you will be able to heat it to the current temperature for less. The temptation then is to turn the thermostat up, and get more comfort for the same amount of money. This means that, when the repayments are taken into account, your overall spend will have increased.
Are there any safeguards against paying more?
If a lower than average user wishes to take out green deal finance, the green deal provider must obtain a written acknowledgement that they are aware that, based on their energy use, the green deal charge may not be fully offset by their energy savings. This covers the first scenario above, but not the second.
What happens if I move?
The premise that the people benefiting from the installation of green deal measures should be the ones who pay is at the heart of the scheme. This means that when you sell or rent out a property with a green deal charge in place, the new owners or tenants take on the repayments via their energy bill. It remains to be seen how potential buyers and tenants will view the green deal charge.
As current owner or landlord, you must disclose that there is a green deal charge attached to the property via an EPC, and get written acknowledgement from the buyer or tenant that they are aware of the charge and understand that they are liable to pay the charge.
If disclosure is disputed the new bill payer has just 90 days after receiving their first electricity bill at the property to complain. After that they will have no recourse and will be liable to pay the green deal charge.
Managing your property improvement programme
Many of the measures that improve the energy efficiency of buildings are easier to install in new properties than to retrofit. Some improvements can be very disruptive. When planning energy efficiency improvements it often makes sense to phase them, and to combine them with other work you might be doing.
For example, if you are replacing your kitchen or bathroom, that would be an ideal time to add internal wall insulation. You could then do other rooms when you decorate them.
If you decide to do a major project, it might be wise to think about who is going to manage the project. Energy efficiency measures are not always understood by all the trades, which have traditionally worked in silos. It is important to know who is going to be responsible for making sure that everything works together.
Green Deal: frequently asked questions
What if my property doesn't meet the golden rule?
If, for example, you have solid walls, and the cost of insulating them is too high to be paid back out of savings in your energy bill, then there are alternatives. The Energy Company Obligation (ECO) combines with the Green Deal to help with the more expensive measures. It also provides help to the most vulnerable low-income households, where people can't currently afford to heat their house properly, and for whom energy efficiency measures will mean a warmer house rather than energy bill savings.
It is also be possible to make an upfront contribution to the cost, so that it does meet the golden rule.
Can renters benefit too?
The Green Deal is available in the rented sector too, both for domestic and commercial properties. Either tenants or landlords can start the process, but they must get the permission of all other parties with an interest in the property before going ahead.
Is it compulsory for landlords to improve the energy efficiency of their properties?
No. Initially the Government hopes the Green Deal will be enough incentive. But if it doesn't prove to be, then it is proposing powers to regulate if necessary. Local authorities will be able to insist landlords of properties with F or G ratings in the EPC make energy efficiency measures that qualify for the Green Deal or ECO.
In the commercial sector it is proposing powers which require landlords to bring properties up to a defined standard (using the Green Deal or equivalent finance) before they can be re-let.
Who provides the Green Deal?
There are three customer-facing roles - in some cases they may all be provided by one company. In others they will be separate.
The Green Deal adviser (GDA) who assesses the energy efficiency of the property,
and makes recommendations of measures suitable for your property. To find a GDA you need to contact a Green Deal Assessment Organisation (GDAO).
The Green Deal installer installs the measures.
The Green Deal provider (GDP) manages the whole process and organises the finance. You can take your green deal advice report to as many GDPs as you wish to get quotes.
The detail of this is yet to be pinned down, and there are likely to be a range of different models. Organisations expressing an interest in getting involved include: energy companies, high street retailers, small energy efficiency companies, builders merchants, housing associations, local authorities and others.
Where does the money come from?
A range of financial institutions and high street retailers.
Are green deal advisors independent?
Some advisors will be totally independent, others will be employed by green deal providers and part of their job will be to sell you the recommended improvements once they have done an assessment.
All advisors are obliged to tell customers whether they are independent or tied to a provider, and how much they are paid (including commissions) for doing an assessment. They will also have to get your consent to offer any additional services (such as sales or indicative Green Deal quotes) before they visit your property.
There are also safeguards in place to ensure that the assessment they do is impartial. It uses a standard methodology, which is independently quality assured. There is a code of practice that sets out the requirements placed on assessors to make sure that the assessment and any advice that follows is impartial, and sanctions that will apply if the requirements aren't complied with.
Most providers are charging an upfront fee for a green deal assessment. These range from £99 to around £250 for domestic assessments. Some companies will knock the fee off the cost of measures installed, if you go ahead. The advisor is generally paid significantly less than this.
Will there be a lot of door knocking and cold calls as a result of the green deal?
Cold calling will be allowed - to allow "people who might not otherwise be reached to be made aware of the opportunies to benefit from the Green Deal".
DECC thinks that the current legislation on doorstep selling "if applied properly … should protect consumers from pressure sales tactics whilst allowing an effective market to flourish".
The one concession it has made to concerns raised in the consultation, is that cold callers will not be allowed to carry out a green deal assessment on the day they cold call, unless requested by the customer and written consent is obtained. Otherwise a cooling off period of at least one day applies.
Green deal participants must respect no cold call requests, whether face to face, by phone, electronic communication, or if "no cold call" stickers are displayed.
What terms will the charge be on?
Green deal finance will be at a fixed rate of interest in the domestic sector. However, green deal providers will have the option to increase the whole charge by 2% per year (in line with the Bank of England's inflation target). This will "allow providers and customers to capitalise on some of the expected increase in savings due to expected fuel price inflation".Warranties and guarantees
Green deal providers must offer a minimum five year guarantee in respect of improvements made, and an extended 10 year guarantee to cover any consequential building damage as a result of the measures being installed (25 years for solid wall and cavity wall insulation).
Can I pay the green deal charge off early?
Yes, but we don't know yet whether there will be a financial penalty for doing so.
Will renewable energy measures be included?
Yes, but they will not meet the golden rule. However, the green deal can be used to pay for part of the installation cost, based on the estimated energy saving for each technology.
Can I use income from FITs of RHI with the green deal?
If you are installing renewable energy measures, income from the feed-in tariff and renewable heat incentive cannot be counted as energy bill savings for the purpose of meeting the golden rule.
The Energy Company Obligation (ECO)
If you are in need of loft or cavity wall insulation or if your boiler needs to be repaired or replaced, then financial help may be at hand under the energy company obligation (ECO).
This is the government scheme that obliges energy companies to contribute towards energy saving measures for homeowners and tenants, sometimes providing the measures absolutely free. The scheme has the twin aims of protecting households from rising energy bills and cutting the UK’s carbon emissions.
Any energy supplier who has more than 250,000 customers is obliged to offer ECO and currently this includes the big six – British Gas, E.on, EDF energy, Npower, Scottish Power and SSE – plus First Utility and Utility Warehouse.
The energy company obligation provides funding for measures such as boiler repairs or replacements and loft or cavity wall insulation, for people who fall into the qualifying categories. It is up to individual suppliers which measures they decide to offer, and whether they will be fully or partially funded, so different companies may be making different provisions available.
Originally scheduled to run until March 2015, in December 2013 the government controversially proposed to extend the deadline by two years to allow energy companies a longer period in which to meet their obligations. Subject to consultation, the new deadline will take effect from April 2014.
Do I qualify?
The conditions under which you could qualify for ECO are complex and you should start by putting in a call to the energy saving advice service (0300 123 1234) to get the latest information. However the most recent guidance states that to qualify you, or someone in your household, must be in receipt of one of the following:
Child tax credit (with an income of £15,860 or less)
Income support (plus one of the extra conditions below)
Income-based job-seekers allowance (plus one of the extra conditions below)
Income-related employment and support allowance plus the support or work related element (and plus one of the extra conditions below)
For the last three of the above conditions, one of the following must also apply:
You are responsible for a child under 16, or under 20 if they’re in education or training
You get disabled child premium
You get disability premium
You get pensioner premium
You’re over 60 and in receipt of working tax credit
I don’t receive any benefits, can I still apply?
Yes. In addition to applying to people on selected benefits, the scheme is also open to anyone who lives in, or near a designated rural area of need. Whilst the government publishes a list of eligible areas, it takes a bit of wading through so a call to the energy saving advice service on 0300 123 1234 is probably the most efficient way of finding out if your postcode falls into one of the qualifying areas.
Theoretically there is also some funding available for properties with hard to treat insulation problems such as solid walls or cavity walls that are hard to access. This part of the energy company obligation is not means-tested. However, the majority of energy companies are choosing to fulfil this part of the obligation through arrangements with housing associations and local authorities and it is unlikely that a private homeowner who is not in receipt of benefits will find an energy company willing to supply them.
How do I access funding through ECO?
ECO is being offered by the big six energy companies plus First Utility and Utility Warehouse. Others may be obliged to sign up as their customer numbers reach 250,000. You do not need to be a customer of the company in order to access ECO through them.
To find out what each of them are offering, contact them directly:
- EDF Energy Call their ECO team on
0800 096 8634 or visit their ECO information pages to apply online.
- British Gas Find out if you’re
eligible by filling in their insulation questionnaire, or give them a bell on
0800 078 3309
- SSE Visit the ECO section of their
website to register your interest online or call them on 0800 980 7537
- Scottish Power Visit their website
to find out if you’re eligible or to apply online or call 01213 547 666.
- Npower See the ECO section of
their website or give them a call on 0800 072 1740 or 0330 100 8123 from your
- E.ON UK Visit the ECO section of their website and fill in their online application form to apply.
- First Utility Try contacting them through their website or by calling their customer service team on 01926 320
700 or 0845 215 5000.
- Utility Warehouse Their customer service number is 0800 131 3000. There is no information about their ECO offerings on their website.
Unfortunately, since ECO is a free market set up, it’s up to
the individual companies to decide which measures they want to provide and how
much they will contribute towards the cost. The only way to find out what is on
offer is to shop around.
I have been approached by someone not connected with the Big Six, who is offering free insulation and boiler replacements. Are they genuine?
Instead of going to the hassle and expense of fulfilling their obligations themselves, some energy companies are choosing to outsource their ECO provision to third party suppliers. These suppliers, who must be registered green deal providers, then ‘sell’ that provision back to the energy companies via a system known as ECO brokerage.
In order to be allowed to offer ECO installations, a company must be a green deal provider. Check they are by looking at the register of green deal providers on the green deal Oversight and Registration Body’s website. Make no assumptions as there have been reports of unscrupulous trading by businesses purporting to be operating under the green deal and energy company obligation schemes.
Alternatively, your caller may have been from a telesales business who is generating 'leads' for companies who offer ECO installations. These guys then sell the 'leads' to the installer. This part of the industry came about because installers were having trouble identifying households who may be eligible for ECO work. Accepting a callback from an installer does not commit you to anything - you are at liberty to accept or reject any ensuing quotes without obligation.
Remember, whether you are cold called, door stepped or are responding to an advert, it is entirely up to you whether to sign up to any services or not. You should never feel pressurised into accepting a deal on the spot and in our view, a conscientious trader will not ask you to do so.
ECO frequently asked questions
I have heard that I could get other measures under the energy company obligation, such as help towards installing a renewable heat system, but I can’t seem to find anyone who is actually offering this service.
This is the rub with ECO. Whilst the scheme was set up by the government to include a long list of measures, it is up to individual energy companies what they choose to offer. Their choices are dictated by economic considerations so energy companies are opting to go for the most cost effective way of meeting their obligations. This means that you are unlikely to find an obligated company who will pay for, or contribute towards anything other than insulation or boiler repairs and replacements.
I heard that the energy company obligation had been watered down. Have I missed out?
The ‘watering down’ you refer to is the government’s controversial proposal in December 2013 to extend the ECO deadline by two years to 2017 without increasing the amount of money energy companies were obliged to spend on measures. Due to take effect from April 2014, subject to consultation, the ‘watering down’ means that energy companies will be given longer to meet the same obligations so that effectively, fewer free or subsidised installations will need to be made each year. This doesn’t mean that you’ve definitely missed out but it does mean that you should move quickly in order to take advantage of fewer opportunities that are available. The December 2013 proposals also significantly reduced the amount of solid wall insulation companies needed to give away under ECO from 80,000 to 25,000 per year. Since energy companies are approaching the bulk of the lower figure, it does mean that you will find it even harder to get free, or subsidised solid wall insulation under ECO from then on.
Do I have to get a green deal assessment in order to access free installations through the energy company obligation?
Not necessarily. If you qualify for ECO and are only interested in measures you can get for free, then a green deal assessment is not necessary. Your chosen energy company will do their own assessment of your needs and make recommendations based on their findings.
However, if you’re interested in more energy saving measures for your home, for example, double glazing or a renewable heating system, you may wish to get a green deal assessment as a first step.
In addition to telling you which free measures you could get under ECO, a green deal report will make an assessment of your home as a whole and recommend what additional measures might help cut your energy bills. It will also tell you if you qualify for any green deal cashback to help pay for the additional measures, and give you details of the steps towards taking out a green deal loan to pay for the excess, if you don’t have the cash upfront.
The reports cost between £99 and £250 depending on whether you go through an energy company (cheaper) or an independent assessor (usually more expensive but arguably more impartial).
It is likely that only some of the measures recommended in your green deal report are likely to be eligible for ECO money. Once you’ve had the ECO work done you may decide at a later date to implement some of the other measures recommended by the report. You can of course do this with your own money, but if you do want to go down the green deal loan route, you’ll have to get another assessment since your home’s heat loss and carbon emissions figures will have changed.
I’ve had an installation done through the energy company obligation but I’m not happy with the results. What can I do?
If you’ve had work done under ECO and you’re not happy, your first recourse should be to the tradesperson who carried out the work. Any work done under ECO will be covered by a guarantee and be documented in the paperwork you receive when the work is done. Check your guarantee if you feel that standards have been breached.
If you do not receive a satisfactory resolution this way, then contact your local trading standards office or Citizen’s Advice on 08454 040506.
The energy company regulator Ofgem is charged with administering the energy company obligation and ensuring that energy companies deliver on the requirements of the scheme. If you’re still not satisfied, you may wish to lodge your complaint with Ofgem by calling 020 7901 0000 or emailing email@example.com.
How to get started with the green deal: based on Cathy's experience