Energy and Climate Change Committee: new incentives needed to encourage energy efficiency improvements

Out-Law News | 26 Sep 2014 | 10:33 am | 2 min. read

The UK government should consider new incentives, such as stamp duty or council tax discounts, if it is to encourage more householders to carry out energy efficiency improvement work on their properties funded through the Green Deal, a committee of MPs has said.

The Energy and Climate Change Committee, which has been keeping the Green Deal and related Energy Companies Obligation (ECO) under review, said that the scheme had only delivered "a fraction of the expected benefits so far". In its latest report, it said that a combination of "financial, communication and behavioural" factors meant that the Green Deal has not attracted uptake .

Established by the 2011 Energy Act, the Green Deal allows property owners and occupiers to fund the installation of energy efficiency measures such as double glazing or insulation at no up-front cost. Repayments are met through subsequent energy bills. Its sister scheme, the ECO, requires energy suppliers to subsidise similar measures for low-income households.

To date, 300,259 Green Deal assessments have been carried out but only around 4,000 of those assessed have gone on to take out or are in the process of taking out a Green Deal plan, the committee said in its report. This low uptake meant that it was impossible for the programme to make much of a contribution towards the UK's carbon targets. Although the committee said that it would "continue to be supportive of the principle" of the scheme, it said that the government had to set out a "clear strategy" to prevent it from being a failure.

The committee identified three types of barrier that had made the Green Deal unattractive to potential customers: financial barriers; communication and trust barriers; and behavioural barriers. The scheme was seen as too complicated by customers and had led to confusion and mistrust, while the cost of the assessment and the high interest rates were repeatedly cited by those giving evidence to the committee as reasons for the poor take-up of the scheme.

Although the committee said that reducing interest rates would make a Green Deal loan "a more attractive proposition for a wider range of households", it conceded that this would be unlikely without the government subsidising or guaranteeing the loans. Instead, tax-based incentives such as variable stamp duty or council tax rates could motivate customers more directly, while the government told the committee that it was looking into ways to offer top-up loans to those customers wishing to install energy efficiency measures that were not covered by the Green Deal's 'golden rule'. This limits borrowing to the amount that would be covered by the money saved on fuel bills.

"Unless the package is made more attractive to a wider group of consumers, Green Deal finance is likely to remain unappealing to many," the committee said in its report.

"We recognise the need for consumer protection in calculating the golden rule, but [the Department of Energy and Climate Change] should be able to offer a better deal for consumers. We recommend that DECC review whether it is being too cautious in calculating projected energy savings and in-use factors, so that the golden rule may become more ambitious. Other financial incentives, such as stamp duty discounts and variable council tax rates for more energy-efficient households, as well as other measures and regulations, should also be experimented with," it said.

The committee also suggested further streamlining the application process, and the development of a "clear and consistent" communications strategy with input from external marketing experts if necessary. As part of this, DECC should "acknowledge its responsibility" for communicating the wider benefits of energy efficiency, it said.