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The gas bill could turn you off energy saving

ImageOne of the features of the Green Deal is the repayment of energy efficiency loans through lower bills. But has the Government chosen the wrong bill?

The Green Deal is primarily designed to save energy used for heating. And for hot water. Across Britain, most heating and hot water is provided by natural gas. So why then is the Green Deal charge set to be placed on the electricity bill?

There is no doubting the ambition of the Green Deal. According to Energy Minister Greg Barker, it is due to be made available to two out of three British households by the end of the decade. As it doesn’t get started until autumn 2012, that means around 2 million homes could be involved every year of its existence. Plus an as yet unidentified number of commercial and services buildings.

Last autumn Mr Barker invited me to chair a new advisory forum made up of some 23 mostly private sector stakeholders. He nominated buildings-related professional bodies, landlords and tenants interests, local government and energy supply associations, environmental and housing organisations to serve with me.

Ambitious programme

Our title is the Green Deal Maximisation Forum. The formal briefing paper, sent to all members with their invitation to participate, states that “the Green Deal is an ambitious programme to increase the energy efficiency of UK building stock. In particular, we expect it to contribute to a 29% reduction in carbon emissions from our homes and 13% from non-domestic properties by 2020.”

Those objectives are nothing if not ambitious. Which is presumably why our official purpose is to “suggest ways of increasing the uptake of the Green Deal across a range of property tenures, types and geographic locations”.

It was greatly encouraging when on Budget Day this March it was formally announced that “the Government will act toencourage and incentivise take-up so that the Green Deal will appeal to households, businesses and prospective providers alike, before it is introduced in 2012.”

The colloquial way in which our role is described is exploring the viability of a set of policy “nudges and triggers”, each designed to help realise the enormous potential for saving energy throughout our building stock.

At the same time, members of my Forum are also anxious to remove any obvious obstacles that might deter likely Green Deal participants. At present, those who make their buildings more energy efficient, and pay their fuel bills by standing order, frequently have to wait an entire year or more before their actual fuel bills are agreed to be reduced. Even if consumption levels may have plummeted in the meantime.

But the biggest worry of the lot – indeed potentially one of the biggest threats to its overall success – is the way that the Green Deal charge is due to be paid back. It will be placed onto the energy bill least likely to be affected by the energy saving investments.

For 78% of occupied British buildings, heating and hot water is provided by natural gas. That is the fuel bill most likely to be reduced after a Green Deal makeover. That would therefore be the logical bill to carry the loan repayments in the vast majority of cases.

Repaid via electricity bill

But because a small minority aren’t on the gas network, and because the energy companies prefer it for their own convenience, the present concept is that the Green Deal loan will be repaid via the electricity bill. The one least likely to be reduced.

Ministers have rightly set great store by trying to ensure that all Green Deal contracts meet the Golden Rule.That means that beneficiaries will save more money via lower fuel bills, than the cost of the initial energy saving investments.

Where participants buy gas and electricity bills from the same company, and when they receive joint bills, allocating the Green Deal to the “wrong bill” shouldn’t be too much of a problem. But the majority of households still buy from two different providers.

And when they find that their electricity bill has continued to rise and that it carries the Green Deal loan cost upon it as well, I fear that this will be when some will be asking loud questions about why on earth they ever got involved with this Government flagship policy at all. Pointing out what may be happening with another bill, incurred with another company, may not appease them. Nor will it the tabloid newspapers to which they go running.

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