Energy Guides

How to get energy-efficient with the Green Deal

Dominic Welling dominic.welling@consumerchoices.co.uk

Soon, you’ll be able to get a loan from your energy company to insulate your home. Here we explain the first details of scheme - and highlight some potential problems.

If you want to improve the energy efficiency of your home but lack the up-front funds to do so, energy companies will, from 2012 be offering loans which you pay back through your bills.

Chris Huhne, energy and climate change secretary, said of the scheme: “I’m confident the Green Deal will catch on with the public. It’ll make upgrading our nation’s draughty homes a no brainer.”

This new scheme is known as the Green Deal - but how does it work and what should you be aware of?

What energy-efficiency measures are covered by the green deal?

insulation work. These include:

• Loft insulation
• Loft insulation top-up
• Cavity wall insulation
• External solid wall insulation
• Internal solid wall insulation

Double glazing is not covered by the Green Deal.

How the loan works

You will be able to approach your energy company to request a loan to cover the cost of insulation instead of having to pay for it upfront, but over the course of time you will pay back the loan by making regular payments through your energy bill.

All loans will be supplied by a third party financial company via your energy supplier, and there will be interest payable on the loan. The government may limit how much interest could be charged but it is too early to tell what level this may be.

The term of the loan would depend on the loan size and what job the loan was intended for, this could range from anywhere between 5-25 years.

All loans however must abide by the Green Deal’s “Golden Rule” whereby all energy bill savings made by the insulation measures must be greater than the amount paid back on the loan.

It remains to be seen, then if consumer will benefit from this type of loan. Audrey Gallacher, head of energy at watchdog Consumer Focus, issued a note of caution: “If the Green Deal is to be the success we all want to see, consumers need to have complete faith that it will work for them, and the government still has a long way to go in addressing all the concerns customers will have.”

Who is responsible for the loan?

Unusually, the loan charge for the energy efficiency measures would be attached to the property and not the owner. Although it seems highly likely that any finance company involved would want to credit check the person applying for the loan.

Nevertheless, as the charge is over the property if the owner sells their home, the buyer would take on the responsibility for the repayments.

Audrey Gallacher, of Consumer Focus added: “The Green Deal involves consumers making a long-term financial commitment and they will need to have confidence that the savings will justify this step.”

You can still switch energy suppliers

Even if you have taken out a Green Deal loan with a particular supplier, you’ll still be able to switch to another provider in the future to benefit from a cheaper energy deal.

The loan will still be in place though, and you will continue to pay it off as normal.

The legislation ensures that energy suppliers are obliged to collect Green Deal repayments and then pass them to the Green Deal provider.

So for example, if you have a Green Deal with energy company A but want to switch to energy company B, it will become energy company B’s responsibility to collect your repayment and pass it onto energy company A.

So you can still switch to get the best energy deal despite being tied into a loan.

Protection from rogue traders

The government has made it clear that the scheme should only use accredited tradesmen.

Chris Huhne added: “Consumer protection will be built into the Green Deal from the word go. Accreditation, a quality mark, insurance-backed warranties – there’ll be no place for cowboys to get a foothold in the Green Deal.”

“I don’t want people to be hoodwinked by rogue traders or receive dodgy advice.”