Out-Law News 3 min. read

UK energy secretary pledges changes to energy efficiency retrofitting schemes after "disappointing" uptake

The number of homeowners that have gone on to apply for finance to fund the installation of energy efficiency measures following an assessment under the Green Deal has been "disappointing", the UK's energy secretary has admitted.

Addressing the Ecobuild industry conference, Ed Davey said that the government was determined to simplify the "clunky and complex" finance scheme, and create new, "attractive" incentives to encourage participation. He also announced the publication of a consultation on changes to the related Energy Companies Obligation (ECO) scheme, which confirms changes to the programme announced as part of the Autumn Statement in December.

The ECO consultation sets out a series of proposed changes to the scheme, designed to reduce costs for suppliers and so reduce the scheme's impact on consumer bills. They include extending the scheme by two years, until 2017; with new 'pro rata' targets applying from 2015-2017. Cheaper measures, such as loft and cavity wall insulation, will also be able to count towards scheme targets.

"The secretary of state said he wanted to improve the two government policies to meet the UK's climate change targets and to improve energy efficiency – interesting though that two days before the UK agreed to now support an EU-wide renewable target of 27% by 2030, subject to this not being translated into binding targets for individual member states," said energy and environment law expert Linda Fletcher of Pinsent Masons, the law firm behind Out-Law.com, who attended the Ecobuild event.

"Davey also admitted that the government didn't get the Green Deal quite right first time, so it is now looking at making changes to improve it, recognising that we have a huge retrofit challenge in the UK. The government will be looking at ways to make the scheme less complex, shortening the time for dealing with applications and looking again at how to deal with situations where the full package of measures cannot be financed through a Green Deal finance plan as a result of the 'golden rule' not being met," she said.

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 will be met through subsequent energy bills. Its sister scheme, the ECO, requires energy suppliers to subsidise similar measures for low-income households.

According to Davey, around half the homes in England and Wales do not have energy saving condensing boilers fitted. Seven and a half million homes could have more roof insulation, five million are not fully double glazed and over five million could benefit from cavity wall insulation. The government has set a target of upgrading at least one million homes under either ECO or the Green Deal by the end of the next financial year, of which 450,000 have already benefitted from some energy efficiency measures.

In his speech, Davey said that more than 145,000 Green Deal assessments had been carried out during the first year of the scheme and that 80% of those who had had an assessment had either acted on it or were "seriously considering" having the recommended work done. He said that the low uptake of Green Deal finance plans was not in itself an area of concern, but said that the government was "determined to take the necessary steps to overcome the barriers that people are saying they face when it comes to accessing" Green Deal finance.

"It's clear from the feedback that the information, administration and finance has been too difficult, lengthy and complicated for people to access easily," he said. "The assessment process needs to be improved."

Among the changes that the government was currently considering were changes to the 'golden rule', governing the amount of money that customers can borrow under a Green Deal finance plan, he said. Currently, homeowners can only borrow for energy saving measures that would be covered by the money saved on fuel bills.

The government will also shortly announce new incentives to encourage participation in the Green Deal, funded by the £450m over three years allocated for this purpose as part of the Autumn Statement, he said.

In his speech, Davey also announced that the domestic portion of the Renewable Heat Incentive (RHI) scheme had received state aid approval from the European Commission and was now "subject to the approval of Parliament".

"We can expect the long delayed domestic RHI to come into effect in April now that state aid approval has been granted and draft regulations are now before Parliament," energy and environmental law expert Linda Fletcher said. "The non-domestic RHI is now seeing greater uptake which is encouraging."

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