UK-GBC Task Group Report: Green Deal Finance
This report produced by the Green Deal Finance Task Group examines the Green Deal interest rate as a barrier to take-up and sets out potential options to reduce the interest rate.
Government’s flagship energy efficiency policy – the Green Deal – was launched in January 2013 with the aim of transforming the energy efficiency of UK homes and creating a new, coherent retrofit industry. At the heart of the scheme is a “Pay As You Save” finance mechanism which allows households to install energy efficiency measures at little or no up-front cost, making repayments on loans via their energy bills.
Yet, almost one year into the scheme, uptake of the finance package has been lacklustre. Although more than 100,000 assessments have been carried out, fewer than 1,500 households have signed Green Deal plans, with under 500 homes having actually installed energy saving measures using the finance1 . Various reasons have been put forward to explain this slow uptake, but a consistent theme has been concern over the interest rates of 8-10 per cent on Green Deal loans offered by the Green Deal Finance Company (GDFC).
In October 2013, UK-GBC convened a Task Group to examine the issue of Green Deal finance. The first aim was to review the available evidence and ascertain whether the interest rate is actually discouraging households from taking up the scheme, or otherwise negatively affecting its performance. Following this, the Group set out to understand what options are available to reduce the interest rate, presenting the associated costs and policy implications, and taking into account the estimated £7-11 billion needed per year over the next 15 years to fund a significant upgrade of the UK housing stock2 .
This report follows a previous UK-GBC Task Group report which examined how take-up of the Green Deal could be driven using structural incentives.