Green Deal Briefing
This briefing explains the Green Deal, and how it works. It also presents the key findings from Chamberlain Forum research for Localise West Midlands and iSE into the practicalities and potential benefits of involving social enterprise as ‘Neighbourhood Gateways’ in the delivery of Green Deal in Birmingham (see report).
The Green Deal
Green Deal is a financial mechanism to improve the energy efficiency of homes and businesses and to remove the upfront cost of doing so. It is part of the Energy Act 2011 and is backed by Government.
A Green Deal provider makes an offer to a householder (homeowner, landlord or tenant) to install energy saving measures into the home. A qualified and accredited Green Deal Assessor will recommend cost-effective energy saving measures. A Green Deal finance provider, which may be a separate company to the main Green Deal provider, arranges finance for the Green Deal package.
The householder agrees to repay the cost of the measures over an agreed period, which may be up to 25 years depending on the cost and nature of the measures. The payments are added to the household electricity bills and appear as a debit on the bill. Your electricity supplier, irrespective of whether or not they are the Green Deal provider, collects the payments in this way through the bills (or through a pre-payment meter) and forwards the payment to the Green Deal finance provider.
The measures will be installed by accredited installers and the householder will enjoy the benefits of energy savings.
The Green Deal charge stays with the property until it is repaid, not with the householder or the electricity supplier. The householder can repay the Green Deal charge early if desired. If there is a change of occupancy, the Green Deal charge is paid by the new occupier. If the householder changes their electricity supplier, then the new electricity supplier must continue to collect the Green Deal charge.
Green Deal providers could be a range of organisations, including utility companies, supermarkets, DIY chains and other high street retailers, local authorities, social housing providers, co-operatives or social enterprises.
The Golden Rule
The Green Deal ‘Golden Rule’ says that in all cases, the financial value of fuel bill savings due to the energy saving measures installed should be greater than the cost to the householder of installing them. It is a legal requirement on Green Deal providers that the Green Deal package that they offer must meet the Golden Rule. Here is an example of how the Golden Rule could work in practice:
- Your current energy bills are £120 per month
- You agree to have energy saving measures costing £9000 installed in your home
- The cost is spread out over 25 years, giving you a monthly Green Deal charge of £30
- Your energy bills fall to £80 per month as a result of the energy saving measures
- The net result is that your overall fuel bill after the measures is £110 per month, which is less than before the Green Deal.
Will everyone benefit from the Golden Rule?
There is additional help available for households who don’t meet the Golden Rule. People may be eligible to receive this extra financial support if they fall into one of the following two categories:
- a vulnerable owner-occupier or private tenant on a means-tested benefit, or
- a home where the measures that are needed are more expensive, such as homes with solid walls, or homes which do not have access to mains gas.
If either of the above applies, the household may be eligible for the Energy Company Obligation (ECO). This is a capital subsidy that all of the large energy companies are obliged to provide for homes that qualify. It doesn’t matter who the household’s gas and electricity is supplied by, or if the Green Deal provider is a different company from the energy supplier. The Green Deal provider will arrange for the ECO subsidy to be paid if the household qualifies.
The householder can pay for all or some of the measures up front if they are able to. Providers may also offer a personal loan. Green Deal providers should make available all the information needed to compare the different options. Householders should evaluate the different financing options to make sure they choose the right package.
Involvement of Social Enterprise
Chamberlain Forum evaluated a Local Energy Assessment Fund (LEAF) project managed by Localise West Midlands and iSE that sought to test out the capacity of local social enterprises to deliver Green Deal activities, as ‘neighbourhood gateways’. The project demonstrated that neighbourhood based social enterprises and enterprising voluntary organisations can play an effective part in Green Deal, by marketing the programme to householders. We found that:
a wide range of social enteprises and enterprises voluntary organisations have the potential to act as ‘neighbourhood gateways’ for Green Deal in Birmingham – they do not however ‘all look alike’
‘neighbourhood gateways’ occupy a natural intermediary position between potential Green Deal providers on one hand, and community groups on the other, in terms of size, legal structure, business model and motivation
‘neighbourhood gateways’ are effectively able to reach a wide range of households across the city, they are highly trusted, and typically engaged in a range of ‘difficult’ conversations with householders around money, relationships, benefits, employment and housing etc
involvement in deliverying Green Deal Activities does not appear to skew the activities of potential ‘neighbourhood gateway’ bodies and that to a large extent it can integrated effectively with their other work
Moreover we found:
assessments carried out following referrals made by ‘neighbourhood gateways’ led to a high level of householder motivation to take ‘green’ action and that about two thirds of households were prepared to undertake small and large scale energy efficiency work on their properties as a result
there was a variation in the ability of neighbourhood based organisations to translate referrals into completed assessments, which suggests that they would benefit from sharing good practice
neigbourhood and social enterprise have the potential to play a part in delivering each stage of the Green Deal from marketing to retrofitting properties, but that to make a significant impact they need to work together to provide a ‘joined up’ service in given neighbourhoods or to give Green Deal providers a ‘joined up’ approach to delivering one aspect of Green Deal, eg marketing
there is significant potential in referral marketing – that is to say householders promoting energy assessment and Green Deal to each other – arising from the involvement of ‘neighbourhood gateways’
that ‘home comfort’ may be a more important motivator than previous studies have suggested and, in the context of a 25 year financial deal, immediate improvements in home comfort could form an important ‘selling point’ for Green Deal
We suggest that:
there is capacity amongst neighbourhood social enterprises and enterprising voluntary organisations in Birmingham to market Green Deal so that at least 60,000 households in the city take part, and that with some development work, this total could be higher over the course of the Green Deal programme
involvement at this sort of scale would lead to the creation of the equivalent of 40 sustainable full-time jobs in neighbourhood regeneration in the city which would not be created and sustained under other circumstances
that if neighbourhood social enterprises and enterprising voluntary organisations acted in partnership, they could ensure the involvement of a significant proportion of the target market for Green Deal in Birmimgham at a competitive price and make a surplus that could be re-invested in further work to benefit their communities
that the benefits of ‘embedding’ skills and expertise in communities and the prospect of enabling significant householder – to householder marketing of Green Deal are further sources of economic and social value added
involving ‘neighbourhood gateways’ is a way of making the most of Green Deal in terms of economic regeneration – that it could produce an additional £1.37 in local economic activity for every £1 of Green Deal investment compared with marketing undertaken directly by Green Deal providers.