Friday 1 February 2013

The Green Deal – A Big Green Secret?


Evidently, according to press reports in the UK, no one knows about The Green Deal. It’s a big, green, energy efficiency secret. Since its announcement only five households have signed up and according to a YouGov poll for uSwitch, four out of five people in the UK have never heard of the government programme, which is not a good start for a scheme designed to help more than 14 million homeowners and businesses to increase their energy efficiency.


In response to the poll, Greg Barker, the climate minister, told the Guardian newspaper that the findings were not surprising. “We’re right at the beginning of the green deal journey, and the uSwitch report is right to identify there is relatively low consumer understanding around the green deal. It’s as you’d expect, as it’s yet to be rolled out. I expect that to change over the coming year. It’s not going to be an overnight success, it’s going to build steadily, strongly over the years.”


The Green Deal is extremely ambitious. It aims to capture £14 billion of private finance over 10 years and an additional £13 billion of Energy Company Obligations (ECO) money will go towards the Green Deal. The not-for-profit Green Deal Finance Company (GDFC) established under the Energy Act 2011 includes some extremely high-profile members including Goldman Sachs, PwC, HSBC, British Gas, RWE npower and E.On.


The first main challenge that the Green Deal will face is now becoming pretty clear: customer up-take. But this is no surprise. The problems with all energy efficiency schemes, even ones where there are no upfront costs like the Green Deal, are various. First, energy efficiency is not a physical object. It’s not like walking away with a new car or a new TV. Yes, you might get a new piece of kit like a smart meter, a new boiler or new double glazing but there is not that emotional response you get when you buy something big, bright and shiny. It’s just not very sexy.


Then there is the issue of trust. Energy suppliers are some of the least trusted UK businesses. They have, rightly or wrongly, had a bad press. The general opinion is that they make mistakes on bills and put prices up even when wholesale costs are falling. The other major issue is that it’s a big hassle having the energy efficiency technologies installed in your home. Builders, mess, disruption, days off work. The final issue is a human behaviour one. For some reason, it’s very hard to give things away for free – ‘it is too good to be true’.


All this aside, what concerns me the most is not necessarily customer up take – it’s not a good start and I think the government and its partners need to do much, much more targeted marketing and work to understand customer demand, but I do think that take up will improve over time. The main issue is the modelling used to assess savings. Models used in California for assessing energy saving have turned out to have a 50 per cent error in 25 per cent of cases. There have been cases here where large property portfolio owners have had widely differing EPC (Energy Performance Certificates) for very similar buildings. Re-visiting them using the same software and the same assumptions results in a much tighter spread. So if funding is going to be made based on certain modelling tools the government, and the investors, need to ensure that these are accurate or we’re throwing money in the wrong direction. What’s more, if the savings turn out to be less than estimated and lower than the repayments will consumers have grounds for compensation.


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Dr Steven Fawkes

Welcome to my blog on energy efficiency and energy efficiency financing. The first question people ask is why my blog is called 'only eleven percent' - the answer is here. I look forward to engaging with you!

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