What is the Green Deal?

What is the Green Deal?

The Green Deal is the Government's solution to the problem of a current lack of investment in energy saving measures in homes and non-domestic buildings. Many properties are very inefficient with regard to energy saving.

The Green Deal aims to provide finance to fund fixed improvements to the energy efficiency of domestic and non-domestic properties, which will provide savings for the bill payer (and future bill payers).

The Green Deal will include a financial framework that enables energy saving measures to be paid for in instalments via energy bills. The core principle is “The Golden Rule”, meaning that the instalment payment for the energy saving measures should not exceed the projected associated cost savings on an average bill for the duration of the Green Deal Finance arrangement, which could be for as long as 25 years.

The Consumer Journey

ADVICE: All households and businesses will be entitled to an energy efficiency assessment as part of Green Deal.  An accredited assessor will produce the assessment.

FINANCE: Green Deal will introduce a new finance mechanism enabling the cost of energy efficiency measures installed to be paid back via the energy bill.

INSTALLATION: Accredited installers will install the measures to the highest standard.  Measures will also be approved to meet certain standards.  This will ensure the energy efficiency measures deliver genuine energy bill and carbon savings and consumers have confidence in the advice, products and services they receive.

REPAYMENTS:  Once energy efficiency improvements have been installed, a charge will be added to the energy meter at the property.  This charge will enable the occupier to repay any Green Deal finance that was taken out via their energy bill.  The repayment obligation will sit with the property and transfer to any new occupier.

Source: DECC

In simple terms:
  • A Green Deal Advisor will visit the property (either domestic or commercial) and make an assessment of the property.  A Green Deal Assessment with energy efficiency recommendations will be produced and given to the property owner/tenant.
  • This advice report is 'portable' and can be taken to any Green Deal Provider for them to provide a quote for the recommended measures to be carried out.
  • The cost of these measures is paid back over the lifetime of the installation (eg. 25 years) through the savings on the electricity bills.  (Electricity has been chosen as the vast majority of households have electricity, but not all have Gas).  This is referred to as the 'Golden Rule'.

For example, if a householder currently pays £X per month for their energy and they take out some Green Deal recommendations that need to be paid back.  The repayment back to the Green Deal Provider will be R.

The SAVING they make per month using the recommendations is S

R (the repayment of the GD loan) will generally be equal to the amount of the savings made (S)  

The amount the householder pays back is still X, but when the Green Deal measures are paid back, the householder will enjoy the saving (S) from their electricity bills.

£X less S plus r ="£X"

or £100 less savings of £20, plus repayments of £20 is £100

The payback period must be no longer than the life of the measure( Golden Rule)

  • Green Deal finance will not operate as a conventional loan - the customer will only be liable for the repayments whilst they occupy the property, and not for the capital amount
  • If the occupants of the property change, the obligation to pay the Green Deal charge will pass to the new occupiers

For further information from DECC click here