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UK-GBC welcomes government green homes policy

GOVERNMENT GREEN HOMES STRATEGY COULD RESULT IN REFURBISHMENT REVOLUTION
 
The UK Green Building Council has today welcomed Government’s commitment to a new way of funding the delivery of low carbon refurbishment in the UK’s existing housing stock.
 
‘Pay As You Save’ describes a system in which the cost of energy efficiency and low carbon measures is paid for over a long period of time – removing the upfront cost for the householder and allowing them to save more on energy bills than they make in repayments.
 
The UK Green Building Council has been campaigning for a Pay As You Save scheme for the last two years.
 
Paul King, Chief Executive of the UK Green Building Council said:
 
“Our leaky housing stock is responsible for 26 per cent of UK carbon emissions. If we want to tackle climate change, save money and conserve energy then we need to find a way of financing the refurbishment of millions of homes. Government can't pay for it and householders don’t have the money upfront.
 
“Pay As You Save will work because energy efficiency pays for itself over time. Spreading the cost over 25 years means the measures can be paid for from ongoing savings on energy bills and still leave the householder better off. 
 
“I'm delighted government has adopted a key UK Green Building Council demand. This is a bold and welcome move. The biggest barrier to low carbon refurbishment - the upfront cost - is set to fall. Pay As You Save is a radical scheme, which could trigger a revolution in household refurbishment - creating at least 100,000 new jobs, saving money and conserving energy.”
 
The UK Green Building Council launches its 'Green Building Manifesto' at EcoBuild tomorrow. Pay As You Save is a key demand of that manifesto (attached).
 
ENDS
 
NOTES:
UK Green Building Council report into Pay As You Save (October 2009) executive summary:
http://www.ukgbc.org/site/document/download/?document_id=669

Under the scheme, the owner of a typical three-bedroom house could reduce annual household energy consumption by up to 40%, saving some 2.8 tonnes of carbon dioxide emissions a year and cutting energy bills by £50-£200. 
 
Figures show that for every 100 homes refurbished per year, ten new jobs would be created - with the potential to create at least 100,000 jobs over the next decade.
 
Broad principles of the Pay As You Save policy proposal
Raising the capital
Significant sums of capital could be sourced from the private sector every year, through bank loans, corporate bonds or raising equity finance from investors that would be made available to ‘Low Carbon Refurbishment Providers’. This could be in excess of £5bn a year (500,000 homes at £10,000) and the UK-GBC has said this could be channelled through a Green Investment Bank.
 
Getting the work done
These properly trained and accredited providers - energy companies, builders and other tradesmen, high street retailers, supermarkets or local authorities - would in turn offer packages of low carbon refurbishment, but at no upfront cost to the householder.
 
Recouping the investment
The householder agrees to a schedule of payments to spread the cost of the work over time. This ‘standing charge’ is passed on from owner to owner over a period of 25 years. The scheme is designed to save the householder money month on month – even after the standing charge has been repaid, because the savings on energy bills outweigh the repayment charge.
 
Further issues
Level of government support
A key question is extent to which government support is needed to underwrite the finance from the private sector. UK-GBC has argued that this support is necessary in order to keep interest rates low and therefore increase the attractiveness of the proposition to the householder.
 
Billing Route
There are two principle options for arranging the billing (repayment) route. One is through the local authority, the other is through the energy company/DNO. UK-GBC recommended the local authority route, although recognised pros and cons with each.
 
Further incentives
The UK-GBC has suggested that further incentives may be needed to stimulate the market for PAYS or similar innovative finance mechanisms. This could take the form of stamp duty or council tax rebates (which could be fiscally neutral) and/or a signal from government that all of the worst performing properties must be upgraded over time based on A-G ratings. This would require homeowners to upgrade before selling or renting their home.