A NEW GREEN deal is coming to England, Scotland, and Wales this February. Launched this month by the UK government, the Green Deal will offer householders a loan to cover home upgrades that should reduce their heating costs over time. The program is intended to improve the UK’s housing stock, which desperately needs insulation retrofits. The types of retrofits the loan will cover include improving the insulation of the home, draught-proofing windows or doors and installing solar panels.
Making use of the Green Deal is a four-step process. First, the home is inspected to determine where improvements can be made. Second, a qualified Green Deal installer will recommend appropriate retrofits for the home. To pay for these upgrades, the homeowner, landlord or tenant will take out a loan with the “Green Deal Finance Company, a non-profit making organization backed by the government” (BBC, 2013). Signing the Green Deal Plan that sets out the terms of this loan is the third step; the fourth is paying off the cost of the retrofits in installments via their electricity bill, at a maximum payback date of 25 years.
If you think the four-step process sounds tedious you are not alone. Since the announcement of the scheme journalists have responded mostly with negative or cautious feedback for the public. The Guardian and the Telegraph warn consumers to be “skeptical” of the loan rates. According to the Telegraph, “consumers will face interest rates of more than 7 per cent on loans through the government-backed deal.” Many worry that the scheme will fail to have uptake because of the complicated process and costly start-up fees of the program. Certain Green Deal installers may also charge to conduct their initial assessment.
Let’s review the pros and cons of the scheme:
- Households can decrease their energy bill each month by improving their home’s envelope
- Electricity prices are expected to rise over the next few decades, so lowering one’s bill now could be advantageous
- Consumers may be more inclined to take out a loan from the government rather than from a bank
- Consumers taking out Green Deal loans will have to repay them at a rate of up to 6.92%, according to the Department of Energy and Climate Change. This could be high depending on the current High Street rate.
- Householders will have to pay a £63 set-up charge, and a £20 a year annual fee to participate.
- There is no guarantee that savings in your bill will outweigh the loan payments
- Should householders sell their home, the loans will need to be taken on by any new homeowner, which may affect the home’s desirability on the market.
It sounds like a design process gone awry. It is certainly well-intentioned, as the UK needs to encourage home retrofits for its citizens and also decrease its carbon emissions, but there must be a better way to design the program.
The cancelled Canadian version of the program, the ecoENERGY Retrofit was similar – except that program offered grants, not loans. Rebates were available for up to $5,000 for home energy retrofits and required a pre-assessment by a qualified energy advisor. Although this national program no longer exists (it was cancelled in March 2012), there still remain some regional and provincial programs to help homeowners manage the cost of home upgrades.
This post was originally published on Alternatives Journal Online, Canada’s Environmental Magazine
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