CERNUNNOS
Your guide to the
Green Deal
www.cernunnos-homes.co.uk
Cernunnos | Green Deal
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What is it all about? You can make energy efficiency improvements to your property at NO UP FRONT COST TO YOU with the loan repaid through energy savings. Learn about the Green Deal and what it means for you, lower your carbon emissions and reduce energy costs. Cernunnos Homes is a renewable energy specialist in retrofitting properties and has created this exclusive report to help you make the most of the new regulations.
www.cernunnos-homes.co.uk
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Contents Introduction............................................................. 4 How the Green Deal works......................................... 6 The 'Golden Rule'..............................................................................................6 Introducing the 'In Use factor'............................................................................6 Calculating the ‘Golden Rule’.............................................................................7
Eligible measures...................................................... 8 Green Deal participants............................................. 10 Green Deal Assessor..........................................................................................10 Green Deal Advisor ...........................................................................................10 Green Deal Advice Report .................................................................................10 Green Deal Provider..........................................................................................10 Green Deal Installer..........................................................................................10
Green Deal process................................................... 12 Assessment & advice report....................................... 14 Before the assessment can take place.................................................................14 The green Deal Assessment...............................................................................14
Green Deal Plan........................................................ 15 Does the Green Deal work alongside the RHI/FiT?...............................................15
Energy Company Obligation...................................... 16 Who Pays for ECO?...........................................................................................16 What is a Hard to Treat Home?...........................................................................16 Who can qualify for ECO?..................................................................................16 How much is the funding worth?........................................................................16 How do I apply for ECO?....................................................................................16
Fequently asked questions........................................ 17 Why should I take part?.....................................................................................17 Who can take part?...........................................................................................17 I am a Landlord and I want to install measures on my property(‘s)?.......................17 I am a Tenant and I want to install measures?......................................................17 Why should I be one of the first?........................................................................17 Does the Green Deal work alongside the RHI/FiT?...............................................17 Am I eligible/suitable for the Green Deal?............................................................17 What is required from me for the Assessment?....................................................18 What will the Assessment Cost?.........................................................................18 What happens once the assessment has been completed?...................................18 What do I need to provide to enter into a Green Deal Plan?..................................18 I would like advice and installations of services not covered by the Green Deal?.....18 Am I entitled to a FREE assessment?..................................................................18 I don’t like the interest rates – why should I bother? ...........................................18 What are the Loan Terms? ................................................................................18
Book your Green Deal assessment now!...................... 19
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Introduction In order to meet the UK’s (legally binding) carbon reduction targets, there is a need to update the old and energy inefficient housing stock. For example:
6
million
UK homes have unfilled cavity walls.
7
4
million
UK solid wall properties are un-insulated.
6
million
UK homes have unisulated lofts.
6
million
UK homes do not have double glazing.
70% of UK homes do not have heating controls.
12
million
UK homes have non-condensing boilers.
The Green Deal is a scheme being implemented from January 2013 by the UK Government. It allows participants to make energy efficiency measures to their property (eligible measures detailed below) at no upfront cost to the property owner. The cost of installing these measures will be met in the form of a loan attached to the property (rather than to the property owner) with the repayments made through the resulting savings in their energy bills. With the loan being attached to the property rather than the property owner this means that the loan will stay with the property for the duration of the loan – irrespective of whether the same owner remains in control of the property. The Green Deal is available to both households and businesses. The loan repayments will be attached to the buildings electricity bills, and therefore the energy efficiency measures implemented may actually save you money on your heating costs, although the loan repayments will be made through your electricity bill (and as such your heating bills will fall and electricity bills will rise by a smaller amount). Alongside the Green Deal will be the launch of the Energy Company Obligation (ECO). This sets a legal obligation on Energy Company’s to help those on lower incomes heat their homes through the Affordable Warmth target. This sets aside at least £540m of funding per year, for 10 years, to make energy saving improvements in the worst homes and a further £350m a year to deliver heating and insulation
measures to the vulnerable. Social Housing tenants will also be able to access funding of around £190m per year for loft and cavity wall insulation measures. This scheme replaces the Community Energy Saving Programme (CESP). Energy Companies, under ECO, will also have a legal obligation to help install measures in “hard to treat” properties, in a scheme known as the Carbon Saving Target (which replaces the Carbon Emissions Reduction Target which ends in Dec 2012). Hard to treat properties include those with solid walls and very old buildings that do not suit external insulation measures, and will include glazing and draught proofing, and it is estimated some 7 million homes could benefit under this scheme.
The total annual funding of the ECO scheme will be some £1.3bn per annum with the scheme being written into law for a minimum of 10 years.
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How the Green Deal works The loans available are attached to the electricity bill of the property, with the loan amount being repaid through energy (and thus financial) savings made through the energy efficiency improvements. The duration will vary depending on the cost of the measure being undertaken and the expected savings, however the loan can be up to 25 years in duration.
The 'Golden Rule' At the heart of the Green Deal is the “Golden Rule” which determines how much finance can be borrowed. The Golden Rule states that the amount borrowed to install the energy efficiency measure (plus interest on the loan) must be less than the expected savings made over the lifetime of the measure. It limits the amount that can be borrowed to the amount that is expected to be saved. It does not mean you cannot borrow or install an energy efficiency measure that does not meet the Golden Rule, it just means you can only borrow the amount that is expected to be saved. If the measure costs more than is expected to be saved then the consumer can choose to part-pay the difference. The expected savings from the energy efficiency measure are also reduced by an “in-use factor” which reduces the expected energy savings by a specified percentage to ensure that the actual savings are actually greater than the expected savings. This ensures that the Golden Rule calculation will be met. The In-Use Factors are specified by the Government for each eligible measure and you can find these later in the booklet.
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Here we run through a very simplified example of how the Green Deal and the Golden Rule works. All figures are fictional and used merely to show how the process works. Please see Supplementary Sheet for actual Green Deal interest rates. Example 1: A consumer currently has the following heating bill of £200 per quarter: Current quarterly heating bill
£200
= £800 per annum
The consumer then wants to install External Wall Insulation (EWI) at a cost of £5,000 and this is expected to save the consumer £600 per annum, or equivalent to £150 per quarter: External Wall Insulation cost
£5,000
Annual Savings
£600
The consumer wants to finance all the External Wall Insulation installation costs through a Green Deal loan, but to do this the Golden Rule must be met. The loan is to be made for the full installation cost at an APR of 7% and can be up to a duration of 25 years: Loan amount
£5,000
Interest Rate
7% APR
Loan duration
25 years
Quarterly Repayment
-£106.24
Here we can see that the total savings and loan repayments over the lifetime of the loan will be: Lifetime Savings from installing EWI (25 years)
£15,000
Lifetime Repayment of Loan
-£10,624.40
Thus the Golden Rule is easily met where the loan is for 25 years.
Introducing the 'In Use factor' The In Use factor, as defined by the DECC, for External Wall Insulation is 25%. Therefore, if we assume that the annual energy savings from installing the External Wall Insulation is £600, the amount that can be used to calculate whether or not the Golden Rule has been met is £600 x (1-25%) = £450. In this case the Golden Rule calculation is: Lifetime Savings from installing EWI (25 years)
£11,250
Lifetime Repayment of Loan
-£10,624.40
Here, the Golden Rule is still met. And therefore you can finance and install the External Wall Insulation under the Green Deal. The savings from your lower heating requirements would reduce your heating bill and the Green Deal loan repayments would be added to your electricity bill: Before EWI
After EWI
Quarterly Heating Bill
£200
£50
Quarterly Electricity Bill
£100
£206.24
Total Quarterly Energy bill (Heating + Electric)
£300
£256.24
What if the Golden Rule is not met? Let us now assume that the annual savings from installing the External Wall Insulation are only £200 (£50 per quarter) – after taking into account the in-use factor: Lifetime Savings from installing EWI (25 years)
£5,000
Lifetime Repayment of Loan
-£10,624.40
And thus the Golden Rule HAS NOT BEEN MET. In this instance the consumer can borrow the amount that does meet the Golden Rule and either: (a) Finance the rest themselves (b) A pply for additional funding through the ECO scheme If the consumer borrows a reduced amount and then finances the rest themselves, they can only borrow the amount that does meet the Golden Rule. Namely: Loan amount
£ 2,750
Interest Rate
7% APR
Loan duration
25 years
Quarterly Repayment
-£66.13
Lifetime Savings from installing EWI
£5,000.00
Lifetime Repayment of Loan
-£4,959.75
Thus, borrowing only £2,750 through the Green Deal ensures that the Golden Rule has been met. The consumer can part finance £2,750 of the installation costs of installing the EWI through the Green Deal, having to pay the balance of £2,250 themselves. Here, the energy bill of the consumer would become: Before EWI
After EWI
Quarterly Heating Bill
£200
£150
Quarterly Electricity Bill
£100
£166.13
Total Quarterly Energy bill (Heating + Electric)
£300
£316.13
Note that here that the new total energy bill has increased. This is especially true for External Wall Insulation which is why the Government has set up ECO funding for this. The majority of other measures should see the net energy bill reduced after the relevant measure has been installed.
Calculating the ‘Golden Rule’ As part of the Green Deal Assessment on the property a list of possible energy efficiency measures will be created specific to that property. This list will be made up of some or all of the measures eligible in the list overleaf. Each of the eligible energy efficiency measures are modelled in RdSAP, a Standard Government Assessment Model. RdSAP will monitor the average cost of each measure and the expected savings and it will be this data that is used to see if a specific measure meets the Golden Rule. In addition, each measure will have its own “in-use” factor whereby the savings estimates from RdSAP would be revised down by a certain percentage based on real life evidence. The reason for this is to ensure that savings estimates are not overly optimistic which would result in excess charges being applied to electricity bills.
This means that manufacturers that claim panels are 25% more efficient than others, and charge as such, can apply to have this taken into account, meaning their product will appear better under the Golden Rule. This is a significant development and could help drive innovation in many markets as manufacturers try to increase efficiencies as much as they currently do to decrease prices. The Green Deal Assessment itself is essentially an EPC (Energy Performance Certificate) report for the property with an additional “Occupancy Assessment”. The Occupancy Assessment asks questions such as Number of Occupants; Type of Heating System; Use of Heating System amongst other things. This will then provide the basis for your Green Deal Advice Report.
RdSAP is already quite a controversial system. Those in the Solar PV market know about SAP being based on a single house in Sheffield and the fact that the system treats the UK as a one degree country – meaning that Glasgow is assumed to have the same climate as Devon. The Government recognises this and is planning to alter RdSAP to account for this. However, it is likely that SAP will remain a very conservative estimate of potential savings. That said, a new feature of the RdSAP process is called the Product Differentiation Process. This is whereby a manufacturer of a specific product can voluntarily prove the energy efficiency levels of their product and apply to have this entered into the RdSAP database. For example, all Solar PV panels are currently treated as having the exact same efficiency levels under SAP. Under the new system, PV manufacturers can apply to state (and must prove) that their panels are more efficient than others.
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Building fabric
Heating, ventilation and air conditioning
Eligible measures
Microgeneration
Water Heating
Lighting (non domestic only)
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Domestic
GD (nondomestic)
ECO (Affordable Warmth)
ECO (Carbon Reduction)
ECO (CSC)
In Use Factor
Condensing boilers (Gas & Oil)
YES
YES
YES
NO
NO
25%
Heating controls
YES
YES
YES
NO
NO
50%
Under-floor heating
YES
YES
YES
NO
NO
0%
Mechanical ventilation
NO
YES
NO
NO
NO
NA
Heating Ventilation and Air Conditioning Controls
NO
YES
YES
NO
NO
NA
Radiant Heating
YES
YES
YES
NO
NO
NA
Warm Air Units
YES
YES
YES
NO
NO
10%
Solar Blinds, Shutters & Shading Devices
NO
YES
NO
NO
NO
NA
Variable Speed drives for fans and pumps (non-domestic)
NO
YES
NO
NO
NO
NA
Transpired Solar Collectors (non-domestic)
NO
YES
NO
NO
NO
NA
Duct Insulation
NO
YES
NO
NO
NO
NA
Fan assisted replacement storage heaters
YES
YES
YES
NO
NO
10%
Flue gas recovery devices
YES
YES
YES
NO
NO
10%
Cavity wall insulation
YES
YES
YES
?
YES
35%
Loft or Rafter insulation
YES
YES
NO
NO
NO
35%
Roof & Room in Roof Insulation
YES
YES
YES
?
YES
25%
Flat roof insulation
YES
YES
YES
?
YES
15%
Internal wall insulation
YES
YES
YES
YES
YES
25%
External wall insulation
YES
YES
YES
YES
YES
25%
Draught proofing
YES
YES
YES
?
YES
15%
Floor insulation
YES
YES
YES
?
YES
15%
External Doors Energy Efficient)
YES
YES
YES
?
YES
15%
Heating System Pipework Insulation
YES
YES
YES
NO
NO
0%
Double Glazing
YES
YES
YES
?
YES
15%
Secondary Glazing
YES
YES
YES
?
YES
15%
Lighting fittings (inlcuding roof lights) (non-domestic)
NO
YES
NO
NO
NO
NA
Lighting controls (non-domestic) here here Yes
NO
YES
NO
NO
NO
NA
DHW Cylinder insulation jackets
YES
YES
YES
NO
NO
15%
DHW Cylinder Thermostats
YES
YES
YES
NO
NO
10%
Waste Water Heat Recovery systems
YES
YES
NO
NO
NO
10%
Hot Water Controls (timers & temp control)
YES
YES
YES
NO
NO
NA
Hot Water Showers (efficient)
YES
YES
YES
NO
NO
NA
Hot Water Systems (efficient)
YES
YES
YES
NO
NO
NA
Hot Water taps (efficient)
YES
YES
YES
NO
NO
NA
Ground Source Heat Pumps
YES
YES
YES
NO
NO
10%
Air Source Heat Pumps
YES
YES
YES
NO
NO
25%
Water Source Heat Pumps
YES
YES
YES
NO
NO
NA
Solar Thermal
YES
YES
YES
NO
NO
0%
Solar PV
YES
YES
NO
NO
NO
0%
Biomass Boilers
YES
YES
YES
NO
NO
25%
Biomass Heaters (inc with radiators)
YES
YES
YES
NO
NO
25%
Micro Wind
YES
YES
YES
NO
NO
0%
Micro-CHP
YES
YES
YES
NO
NO
25%
Estimated Cost
Estmiated Annual Saving
Payback Period (years)
Loan repayment @ 7% for 25 years
Golden Rule Met?
Self Finance Amount Required?
Revised Loan Repayment
£1,000
£150
7
-£85.81
YES
NO
NA
£10
£5
2
-£0.86
YES
NO
NA
Under-floor heating
£2,000
£100
20
-£171.62
NO
£850.00
-£98.68
Heat recovery systems
£5,000
£500
10
-£429.05
YES
NO
NA
Mechanical ventilation (non-domestic)
£5,000
£500
10
-£429.05
YES
NO
NA
NA
NA
NA
NA
NA
NA
NA
Flue gas recovery devices
£600
£100
6
-£51.49
YES
NO
NA
Cavity wall insulation
£450
£150
3
-£38.61
YES
NO
NA
Loft insulation
£250
£100
3
-£21.45
YES
NO
NA
Flat roof insulation
£1,000
£100
10
-£85.81
YES
NO
NA
Internal wall insulation
£6,000
£450
13
-£514.86
NO
£1,000.00
-£429.05
External wall insulation
£10,000
£500
20
-£858.11
NO
£4,250.00
-£493.41
Draught proofing
£100
£25
4
-£8.58
YES
NO
NA
Floor insulation
£400
£100
4
-£34.32
YES
NO
NA
Heating system insulation (cylinder, pipes)
£50
£10
5
-£4.29
YES
NO
NA
Energy efficient glazing and external doors
£4,000
£200
20
-£343.24
NO
£1,750.00
-£193.07
Lighting fittings
£1,000
£300
3
-£85.81
YES
NO
NA
Lighting controls
£250
£25
10
-£21.45
YES
NO
NA
Innovative hot water systems
NA
NA
NA
NA
NA
NA
NA
DHW Cylinder insulation jackets
£50
£5
10
-£4.29
YES
NO
NA
DHW Cylinder Thermostats
£25
£3
10
-£2.15
YES
NO
NA
Waste Water Heat Recovery systems
£500
£25
20
-£42.91
NO
£210.00
-£24.89
Water efficient taps and showers
£50
£20
3
-£4.29
YES
NO
NA
GSHP
£15,000
£1,000
8
-£1,287.16
NO
£3,500.00
-£986.82
ASHP
£4,000
£500
12
-£343.24
YES
NO
NA
Solar Thermal
£4,000
£500
12
-£343.24
YES
NO
NA
Solar PV
£5,000
£500
10
-£429.05
YES
NO
NA
Biomass Boilers
£2,000
£300
-£171.62
YES
NO
NA
Micro Wind
£5,000
£500
-£429.05
YES
NO
NA
Micro-CHP
£10,000
£1,000
-£858.11
YES
NO
NA
Condensing boilers (Gas & Oil) Heating controls
Fan assisted replacement storage heaters
One thing to remember is that the energy savings of one system, that exceed the requirements of the Golden Rule, can be used towards meeting the Golden Rule of another system as long as both measures are installed at the same time under the same Green Deal Plan. Estimated Costs and Savings are taken for an average 3 bed house. Loan repayment is assumed at 7%. For actual costs and savings please contact a Cernunnos Representative. For Loan rates please see the attached Supplementary Sheet. 9
Green Deal participants Green Deal Assessor This is an individual or organisation that is authorised to market the Green Deal, provide initial advice and ascertain suitability1. The Assessor must give the client sufficient information about the Green Deal process and decide whether the client is suitable & eligible to apply for the Green Deal scheme. If the client is suitable & eligible, the Green Deal Assessor can then arrange for a site survey to be conducted to produce a Green Deal Advice Report. The Green Deal Advice Report and required site survey will be conducted by a Green Deal Advisor.
Green Deal Advisor The Green Deal Advisor is an independent assessor who conducts the site survey to produce the GDAR. They must be registered as qualified a Green Deal Advisor. The advisor will then take the data from the site survey and enter it into a Government model which will produce the Green Deal Advice Report.
Green Deal Advice Report This is a report produced about the property by a suitably qualified person who is authorised to undertake and complete a Green Deal Advice Report (GDAR). The GDAR assessment is undertaken by a Green Deal Advisor who is registered as a suitably qualified person. The GDAR is made up of 2 main elements:
1. Fabric Assessment: This is basically an enhanced Energy Performance Certificate that will look at the fabric heat losses of the property and will let you know the current Energy Efficiency of the property. It measures every room, every window, the standard of the building fabric (double glazing, insulation etcetera) and states the energy efficiency of the building as it stands now. 2. Occupancy Assessment: This is a second stage of the report that takes into account how the building is used. It asks such questions as how much hot water is used? Do you like the temperature of the house at [25] degrees Celsius (or 24, or 23 etcetera)? Do you have showers or baths? It is essentially an assessment that takes into account how you live within the building fabric and ensures the GDAR report is specific to you. Once the GDAR has been produced it will show you the current Energy Efficiency rating of the property and will recommend certain energy efficiency improvements that are eligible under the Green Deal. The report will then be sent to the client and to the Green Deal Assessor. The Green Deal Assessor will then discuss the GDAR with the client and decide on a Green Deal Plan. Green Deal Plan: This is the final plan agreed upon by the Green Deal Assessor and the client. It will contain a number of energy efficiency improvements that are to be conducted on the property under the Green Deal. Not all measures in the GDAR have to be undertaken and it is up to the client to decide which measures to implement. Once this is drafted, with the expected savings and repayments calculated, the Green Deal Assessor will then arrange for the financing to be put in place. The financing is provided by a Green Deal Provider.
1 Green Deal Advisors can also be Green Deal Assessors. Green Deal Providers are also allowed to market the Green Deal and sub-contract out the assessment to the Green Deal Advisor. 10
www.cernunnos-homes.co.uk
Green Deal Provider This is a company that provides the financing under the Green Deal scheme so that the energy efficiency improvements can be paid for. It is a loan provided against the property and the repayments are made through your electricity bill with the higher electricity payments being offset by lower energy bills elsewhere (i.e. lower gas bills etcetera). The Green Deal Assessor can arrange for this for the client OR the client can arrange for this themselves. The client should look to get more than one quote from Green Deal Providers, and if the amount of works to be carried out is over £10,000 then they are required to get at least 3 quotes. Once the client finds a package that suits them and they are happy with the selected Green Deal Provider, they will sign a contract to proceed with the works. The Green Deal provider will then project manage the installation and arrange for authorised Green Deal installers to undertake the installations. They are responsible for the entire process, from installation and commissioning, to paperwork – not only from themselves but ALL paperwork from the Green Deal Advisor and the Green Deal Installer.
Green Deal Installer The Green Deal Installer is the company that has been asked to install the measure included in the GDAR. Each installer must be registered under the Green Deal scheme as a qualified installer for their area of expertise. Therefore, if you are having a range of measures undertaken, you may find that you have several different installations companies coming to your property. This is because some installers will be qualified to undertake installations such as insulation whilst others will be able to undertake installations such as Windows and Draft Proofing etcetera.
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Green Deal process 1. Consumer Requests a Green Deal Assessment: The consumer can request a Green Deal Assessment from a Green Deal Assessor, Advisor, Provider or Installer. However, each of these organisations will have to arrange for an accredited Green Deal Advisor to produce the EPC, Occupancy Assessment and eventual Green Deal Advice Report (GDAR). 2. Green Deal Advisor carries out assessment: The Green Deal Advisor carries out the assessment for the EPC and Occupancy assessment. This is likely to take several hours and will require the input of the person living in the property.
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3. The Green Deal Advisor will generate the Green Deal Advice Report. This will contain the EPC, Occupancy Assessment and then a range of eligible Green Deal measures that meet the ‘Golden Rule’. These will be marked on the GDAR by a green tick. Ones marked in Orange are measures that you could include but do not meet the Golden Rule. In these cases you will only be able to borrow a proportion of the installation costs from Green Deal Finance. Once the GDAR has been produced it is sent to the client and to the Organisation that commissioned the report. 4. The client can then discuss the GDAR with the organisation they have been in contact with (either the Green Deal Assessor, Advisor, Provider or Installer) and can either then decide not to proceed or can draw up a list of measures they want installed. This list of measures will create the Green Deal Plan.
5. Following this the Green Deal Plan is accepted and Green Deal Finance can be arranged for through a Green Deal Provider. It is advised that the client seeks several quotes for the Green Deal Plan from several Green Deal Providers, and this is a requirement if the amount of finance being sought is greater than £10,000. The selected Green Deal Provider will then arrange for the installation measures to be completed and is in charge of the project from hereon in. 6. The selected Green Deal Installers are subcontracted to undertake the works by the Green Deal Provider. The Green Deal Provider is also responsible for all paperwork from this stage onwards and will arrange for the repayments of the finance to be added to your electricity bill. They shall also make sure that all installations are completed and all installer paperwork is handed over.
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Assessment & advice report Before the assessment can take place If the assessment is for a landlord then written confirmation will be required from the property tenant providing consent for the assessment to be carried out, including willingness to participate in/ provide information necessary for the occupancy assessment. If the assessment is for a tenant then you may need to provide written consent from the property owner prior to the installation of measures as part of a Green Deal Plan, depending on the conditions of the tenancy agreement. The tenant would also need to obtain the consent of the landlord to attach the Green Deal charge to the electricity meter.
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The green Deal Assessment The Green Deal Assessor must be impartial and provide as much impartial advice to the consumer as possible. The site survey will be very similar to the current EPC survey and takes several hours to conduct. They will then create a current EPC rating (and report) for the property. In addition to this an Occupancy Assessment will be conducted to determine how the household’s energy use compares to the assumptions in RdSAP, and therefore to the level of savings they are likely to achieve. It will be the assessor’s responsibility to ensure that the energy and financial savings calculations that the Green Deal Advice Report uses as the basis of its Golden Rule are correct and not overstated. Thus the table above that shows expected installation costs and expected annual savings will be individual to every household.
The Assessor will also be responsible for giving out information to occupants about the ECO funding and if an assessor notices a property is being under heated due to fuel poverty they can apply for ECO funding as part of the Green Deal process. Similarly if a home requires external wall insulation ECO funding can be applied for and obtained to help meet the Golden Rule. Finally, a Green Deal Advice Report with all of the above will be supplied to the consumer and Green Deal Provider, with some behavioural advice.
Green Deal Plan The Green Deal Plan is created from the list of eligible measures. Any number of measures can be installed in isolation or combination, although a combination of measures installed simultaneously is encouraged to achieve economies of scale. When creating a Green Deal Plan the consumer/Green Deal Provider can use savings from measures which are particularly cost-effective to finance other measures which may not be as cost effective and would have otherwise required top-up finance. For example, from the table below we see that Measure A has excess savings of £70.95 per annum, equating to 25 year savings of £1,773.69. This £1,773.69 could then be used as the self-financing part to allow Measure B to be installed, which required self-financing of £1,350: Taking a whole-house approach is intended to create Economies of Scale for the installation process and ensure that energy efficiency is delivered on a cost effective basis. They also want simple measures to be undertaken before/ alongside more complicated measures such as micro-generation. Many of the measures such as insulation and light fittings are simple and will always be undertaken as they are so cost effective when borrowing for a 25 year period. This method of creating Economies of Scale is also likely to bring loan durations down as the payback period of different system efficiency measures are averaged out.
Estimated Cost
The Green Deal Plan will include the product and installation costs of the measures being installed which will form the official quotation, and each, with the expected annual savings, will be unique to every consumer. The quotation will be based not only on the cost of having all the works completed, but also the finance offer from a Green Deal finance company. These companies are specifically off erring Green Deal loans and interest rates are to be kept to a minimum (it has been discussed that a loan of around 7% APR will be available). The consumer can and should get up to 3 quotations for any Green Deal Plan from 3 different Green Deal Providers. Alternatively, the consumer can go directly to a Green Deal Installer for a quotation for the works to be completed. Finally, when a quotation is accepted by the consumer, following a cooling off period of 14 days works can be carried out.
Loan Estmiated repayment @ Annual Saving 7% for 25 years
Does the Green Deal work alongside the RHI/FiT? The RHI has been delayed for households until Summer 2013 whilst the Green Deal has been delayed for Businesses until Spring 2013! Measures undertaken using Green Deal finance will still be eligible for FiT and RHI payments, although the payments from these incentive schemes cannot be used in the calculation of the Golden Rule. This could particularly benefit Landlords who can have renewable measures installed on their properties such as Solar PV, have the tenant pay for them through their energy bill and the Landlord still collect the FiT payments!
Golden Rule Met?
Self Finance Amount Required?
Revised Loan Repayment
MEASURE A
£5,000
£500
-£429.05
YES
NO
NA
MEASURE B
£2,500
£100
-£214.53
NO
£1,350.00
-£98.68
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Energy Company Obligation The Government has recognised that not all energy efficiency measures will work under the Green Deal as they will not meet the Golden Rule. In order to combat this they have removed the old schemes of CERT (Carbon Emissions Reduction Target – aimed at forcing large energy companies to reduce carbon emissions) and CESP (Community Energy Saving Programme – aimed at low income households) and replaced these with a new scheme called the Energy Company Obligation (ECO). ECO has 3 parts and is launched in conjunction with the Green Deal:
1. The Affordable Warmth Target: • Households with low incomes or qualifying benefits can access ECO under this scheme. •A round £325 Million will be implemented into the Affordable Warmth category of ECO. •A ffordable Warmth aims to tackle fuel poverty (defined as where residents spend more than 10% of their household income on fuel) and will focus on products and services which improve the thermal performance of a property, including home insulation and central heating.
2. The Carbon Reduction Target: •T he CRT is for Hard to Treat homes: i.e. those that require energy saving measures that will not fall under the Green Deal financing package such as Solid Wall Insulation or External Wall Insulation. •T his element of ECO funding is available to both private householders and social housing residents.
3. Carbon Saving Obligation: •T he Carbon Reduction Target includes a community fund called the Carbon Saving Community Obligation (CSCO). •C SCO is for the most deprived homes in the UK and has been designed to help specific communities, identified as the top 15% areas of deprivation in the UK
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The primary measure that does not meet the Golden Rule is Solid Wall Insulation (or External Wall Insulation). This is because the cost of installing such a measure will rarely pay for itself given the financial savings over the life of the measure (i.e. the savings on heating bills over 25 years will never equal the initial cost of installing the Solid Wall Insulation).
The “orange tick” means that the measure has not met the “golden rule” and this implies that Green Deal Finance can only be used to partially pay for the measure. The amount of funding provided under the Green Deal is the amount that can be repaid through savings over the life of the installation.
Who Pays for ECO?
A property has a Green Deal Advice Report and the GDAR comes back saying that the only measure available to this property is Solid/External Wall Insulation (EWI). The cost of the EWI is £12,000. The annual savings are £500 per annum.
The energy companies are required to reduce carbon emissions of homeowners every year by a certain amount. In the past this has seen large utility companies offer free loft insulation etcetera. The Government has now said that they can no longer offer free loft insulation and other such measures as these will be covered under the Green Deal. The Government has now forced these companies to pay for Solid Wall Insulation for Hard to Treat Homes through the ECO system. This essentially means that the Energy Companies have to provide the financing for this scheme to meet their Carbon reduction Commitments.
What is a Hard to Treat Home? A Hard to Treat home is a home that has solid walls and requires Solid/External Wall Insulation either under the Green Deal or Eco.
Who can qualify for ECO? Anyone can qualify for ECO funding for Solid/External Wall insulation if they cannot get the financing through the Green Deal.
How much is the funding worth? Basically, the funding will cover the gap between what can be financed under the Green Deal and the cost of installing the Solid Wall Insulation. Therefore, if you have a Green Deal Advice Report (GDAR), and this recommends that Solid/ External Wall Insulation is advisable for the property it will have an “orange tick” next to it on the GDAR.
Let’s look at an example to clarify this:
Thus the total savings under the Green Deal over 25 years are £12,500. We then have to take into account the “In Use Factor” under the Green Deal. This is a discount factor used under the Green Deal that reduces the expected savings by a certain amount to allow for a “comfort factor”. The “In Use Factor” for EWI is 25%. Therefore the expected annual savings of £500 are reduced by 25% per annum, giving a Green Deal Saving of £375 per annum and £9375 over 25 years. This £9375 is the amount that can be financed under the Green Deal. You can then apply for ECO funding to finance the rest (£2625) at no cost to yourself. Once financing is obtained and a registered Green Deal Installer completes the installation you will then see £375 added to your electricity bill per annum and your heating bill reduced by at least £500 per annum, giving you a saving of £125 per annum.
How do I apply for ECO? If you are applying for ECO under Hard to Treat Properties then you will need to have a Green Deal Advice Report created firstly. This will then give you the facts about how much can be financed through the Green Deal and whether you can apply for any ECO funding. For other sources of ECO funding a Green Deal Advisor or Assessor will advise you if you are eligible to apply directly under ECO rather than Green Deal.
Fequently asked questions Why should I take part? Landlords (domestic and commercial) will have to update their properties to an ‘E’ rating by 2018 and cannot deny reasonable requests from tenants for energy efficiency upgrades from April 2016. Landlords are a prime candidate for this scheme as they can associate the loan with the property and have the tenants repay the loan through the energy bills of an occupied property. In addition commercial properties that are more energy efficient will be more desirable to potential tenants and could well command increased rental premiums. This is likely to drive this potential sector to take up the Green Deal. Elsewhere, the Government has announced that properties undertaking extensions and/or retro-fits will be obliged to partake in the Green Deal, which makes sense as they can then pay for energy efficiency measures on extensions at no up-front cost to the builder/consumer. Meanwhile social landlords and local authorities will be encouraged to take part in the scheme with many already planning for the scheme launch now. Finally, why not take advantage? If you were considering upgrading your boiler or installing new windows you can now do this at no up-front costs, whilst similarly increasing the value of your property.
Who can take part? The Green Deal will be launched for all homeowners in January 2013. For businesses it has been delayed until “spring 2013”. All homeowners will be eligible to take part in either the Green Deal or ECO. Because the Green Deal loan is not a personal loan it is not means tested and thus no personal credit check will be performed (there will be a credit check on the property itself though to make sure a Green Deal loan hasn’t been taken previously!).
I am a Landlord and I want to install measures on my property(‘s)? If the assessment is for a landlord then written confirmation will be required from the property tenant providing consent for the assessment to be carried out, including willingness to participate in/provide information necessary for the occupancy assessment.
I am a Tenant and I want to install measures? If the assessment is for a tenant then you may need to provide written consent from the property owner prior to the installation of measures as part of a Green Deal Plan, depending on the conditions of the tenancy agreement. The tenant would also need to obtain the consent of the landlord to attach the Green Deal charge to the electricity meter.
Why should I be one of the first? The UK Government is set to allocate £200m of funding as a special time limited introductory offer to boost he early uptake of the scheme. The Green Deal is the last and only large scale environmental policy of the coalition Government and they will do everything they can to make sure it succeeds.
Does the Green Deal work alongside the RHI/FiT? The RHI has been delayed for households until 2013 whilst the Green Deal has been delayed for Businesses until 2013! The Government recognises that there are advantages of running the schemes side by side but has not actually worked out how to do this as of yet. They want to encourage the uptake of energy efficiency before energy generation is installed and it has yet to be decided on how best to do this. Solar PV is included in the list of eligible technologies for the Green Deal, and using funding from the Green Deal to pay for Solar PV systems on your house is allowed. You will also then be eligible for the Feed in Tariff scheme.
Am I eligible/suitable for the Green Deal? If the assessment is for a landlord then written confirmation will be required from the property tenant providing consent for the assessment to be carried out, including willingness to participate in/provide information necessary for the occupancy assessment. If the assessment is for a tenant then you may need to provide written consent from the property owner prior to the installation of measures as part of a Green Deal Plan, depending on the conditions of the tenancy agreement. The tenant would also need to obtain the consent of the landlord to attach the Green Deal charge to the electricity meter. All properties that wish to participate under the Green Deal will have to have a current electricity feed connection to the national grid with an electricity meter (as this is what the finance charges will be added to) and have to have their electricity supplied by a licensed electricity supplier.
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Fequently asked questions What is required from me for the Assessment? Access to the property for the EPC is obviously required and this may take several hours to complete. The Assessor will measure every room and window size. They will need access to the loft and every room in the property. For the Occupational Assessment the Assessor will have to ask you some questions such as:
• Number of Occupants? • Which heating system is normally used? • Which rooms are heated by which heating systems and to what temperatures? • Heating patterns that you tend to work to (i.e. heat in evening or morning etcetera)? • Whether you have showers or baths and what time of day? • Whether you use tumble dryers and how often? • How many cold appliances do you run and to what temperature? • What type of cooker is there and how often is it used? • Energy Bill data (Gas and Electric) and current tariffs? All data that is taken, such as measurements, notes and photographic evidence will be kept by the Green Deal Advisor for a minimum period of 10 years (in the case of Cernunnos). This data will be kept confidential at all times, although will be made accessible to the Green Deal regulatory authority, the Green Deal Provider or the Green Deal Advisor should they wish to view the data.
What will the Assessment Cost? The Assessment costs £80.00 + VAT @ 20%. This is payable to Cernunnos on completion of the report and before it is sent out to you. The Assessor will either be a direct employee of Cernunnos or a sub-contractor for Cernunnos. The Green Deal Advisor who carries out the assessment will not be working for any particular Green Deal Provider and will not be able to offer advice as to which Provider you select. Cernunnos is also not tied to any Green Deal Provider.
What happens once the assessment has been completed? You should receive your Green Deal Advice Report (GDAR) within 14 working days. You will also receive a Green Deal Assessment checklist. The GDAR is then portable, which means that you can take the report and its findings to ANY GREEN DEAL PROVIDER to request a quote for the installation of the measures. In addition, the new EPC produced on the property as a result of the GDAR, will be lodged after any installation of measures as part of taking out the Green Deal Plan. The Green Deal Provider will be responsible for ensuring the new EPC is lodged and provided to the customer in line with the requirements of the Code of Practice.
What do I need to provide to enter into a Green Deal Plan? You will need to supply your electricity operators details, MPAN number (from a recent electricity bill) and your account details.
I would like advice and installations of services not covered by the Green Deal? This must be stated in writing prior to the assessment. The Green Deal Advisor cannot recommend any measures on the day and will not be able to provide any advice on the day. This will be the responsibility of Cernunnos.
Am I entitled to a FREE assessment? There are situation where you may be entitled to free assessments. To find out more you should contact the Energy Saving Trust at www.energysavingtrust. org.uk or call 0207 222 0101 (England and Wales) or the ESSAC network in Scotland on (TBA).
I don’t like the interest rates – why should I bother? The interest rates are based on the market rate for an unsecured loan. The Government is merely putting in a back-stop financing scheme. In essence, they want you to finance this yourself should you have the funds (as your savings will not be earning the loan interest rates!). If you do not have the funds then you can get Green Deal Finance (which you can do even if you have the funds!). The main point of the scheme is that now you can get an impartial and independent report (GDAR) on your property with a list of measures that you can implement (either through the Green Deal or not) to lower energy bills and save carbon. Whether you use your own funds or Green Deal finance is irrespective. The GDAR should be the focus point of the scheme.
What are the Loan Terms? Please see the Supplementary Sheet for the loan rates, duration and repayment details.
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