Dealer's choice
Local authorities should consider playing an active rather than passive role when it comes to the Green Deal, write David Hutton and Patrick Sweeney.
The Green Deal allows energy efficiency measures to be installed at properties without owners or occupiers paying for these improvements immediately. It will revolutionise the energy efficiency of the nation’s homes and businesses, and will help people insulate against rising energy prices, creating homes which are warmer and cheaper to run. Now the Energy Act 2011 has received Royal Assent and the consultation on the secondary legislation has been published, this fledging industry can start preparing in earnest for the new scheme.
What is the Green Deal?
The Green Deal is established under the Energy Act 2011. It provides a framework whereby payments for the costs of energy efficiency improvements are recovered in instalments through energy bills over a defined period. The basis of this offer is the so-called Golden Rule that “estimated saving on bills will always equal or exceed the cost of the work”. The intention is that the Golden Rule can be applied to domestic properties as well as non-domestic properties.
The efficiency measures will have to be approved and the claimed bill savings must be accredited through the process.
The measures installed must have been recommended for that property by an accredited, objective adviser who has carried out an assessment, and the measures must be installed by an accredited installer. Householders will require the protection of the Consumer Credit Act and consent will be required from all relevant parties (e.g. landlord and the current energy bill-payer). The presence of any Green Deal Plan will need to be properly disclosed to subsequent bill-payers (new tenants or owners) as the liability (except for bad debts) will stay with the property.
Energy suppliers must collect the Green Deal charge and pass it on within the existing regulatory safeguards for collecting energy bill payments. There will be additional support for those in fuel poverty or hard to treat properties through the Energy Company Obligation (the "ECO") which is due to replace CESP and CERT.
Energy Act 2011
The Act contains the legal framework for the Green Deal, which will be launched in Autumn 2012.
The key elements are that it:
- removes the upfront cost of energy efficiency measures (like loft, cavity and external wall insulation, draught proofing and energy efficiency glazing and boilers), making expensive home improvement affordable. For the first time in the world, the energy saving work will be repaid over time through a charge on the home’s energy bill. The repayments must obey the Golden Rule;
- puts consumer protection at the heart of the Green Deal. High standards will be crucial from the first independent home energy assessment to getting the job done by qualified installers. All Green Deal participants will need to carry a “quality mark” so customers know they can be trusted to do a good job;
- provides extra financial help for the most vulnerable and hardest to treat homes by getting energy companies to fund work like basic insulation and boiler upgrades as well as helping those living in homes where the cost of the work, like solid wall insulation, may not obey the Golden Rule without extra money to make it affordable;
- improves at least 682,000 privately rented homes. From April 2018 it will be unlawful to rent out a house or business premises which have less than an “E” energy efficiency rating.
What next?
DECC issued its consultation on the details of the scheme on 23 November 2011, accompanied by six sets of draft regulations, the draft Code of Practice and draft Green Deal Arrangements Agreement, and draft amendments and modifications to energy company licences and industry agreements. The consultation closes on 18 January 2012.
The Government proposes that the Green Deal and ECO should begin in October 2012 so that there is no risk of a gap before CERT and CESP end on 31 December 2012, with transitional arrangements for the period when both old and new schemes are in operation. DECC aims to have the first tranche of certification bodies accredited by April 2012, with a second tranche in August 2012 so that their members have time to begin marketing their services prior to launch of the Green Deal.
Financing of the programme is a major issue. The current expectation is that an average domestic property may need approximately £7,000 spent on it. As the householder will not pay upfront the Green Deal Provider will need to finance this from somewhere. There is much talk of regional or national aggregators (the Green Deal Finance Company is gaining media attention) although how it will operate and whether it can attract the finance remain questions to be answered. The market needs to address the financing issues if the programme is to get off the ground.
One proposal is that energy companies should be able to jointly fund measures and receive full credit for the carbon or cost savings regardless of the proportion of funding that they contribute to its installation, with the aim of encouraging energy suppliers to both drive down delivery costs and to lever in supporting funding wherever possible.
The consultation paper also stresses how a key feature of the Green Deal is its flexibility. This includes flexibibility in financing terms, providing consumers with greater choice over repayment terms so that they can shorten the payback period or lower the instalments if they so wish.
Energy Company Obligation
The ECO requires the big energy suppliers to provide extra support for owners of hard to treat homes (Carbon Saving obligation), and the lowest income and vulnerable households (Affordable Warmth Obligation), so that they can benefit from the new arrangements. The consultation makes it clear that the Carbon Saving obligation is intended to focus on insulation systems for solid walls and that non-insulation measures will only be supported where delivered as part of a package that includes insulation for a harder to treat-property.
The Affordable Warmth element is designed to provide support to those low income and vulnerable households who are least able to heat their homes to an adequate standard and consequently most prone to suffering health or social detriment. Eligibility will be restricted to those households in receipt of certain benefits or tax credits who include an older person, a child or someone with a disability, and who do not have access to alternative sources of support to improve their heating arrangements; also social housing is excluded.
How can local authorities take part?
DECC initially commented that they thought the Green Deal would be delivered by the private sector but there has been a great deal of interest not just from local government but also housing providers. The consultation highlights how the role of local authorities and other local partners will be crucial in ensuring effective and intensive delivery of the ECO and Green Deal in particular areas.
So why should local authorities be interested? Local authorities may play various different roles within the Green Deal as a whole, including acting as Green Deal providers themselves. They can also act as partners for the ECO, adding value by, for example, providing information on local housing stock, and endorsing and helping market company activity, using their position as a trusted interlocutor with households to increase local acceptance and take-up.
In addition, new guidance under the Home Energy Conservation Act 1995 is likely to ask local authorities to report on how they plan to engage with the Green Deal and the ECO.
As a firm, we have has been appointed by Birmingham City Council to advise it and 39 other public bodies to procure a Green Deal delivery partner for the West Midlands region with an estimated value of £1.55bn.
There are a number of reasons why authorities might wish to play an active rather than passive role:
- as a means of dealing with their own carbon emissions. This is one of the major reasons behind the Birmingham procurement as the city has a commitment to reduce its carbon emissions by 50% by 2026;
- to address their non-domestic property estate; to support their residents in accessing funding and delivering Green Deal measures;
- to support their residents in accessing funding and delivering Green Deal measures;
- to support the growth (or maintenance) in their region for much of the surveying and installation work and thereby using it as a focus for jobs and skills.
What are the options for a local authority?
As Green Deal becomes more immediate we are aware that one size will not fit all. The Birmingham approach is but one.
- Birmingham have stated that they wish to procure a Green Deal Provider that will be able to deliver, in two phases, Green Deal measures to about 60,000 dwellings (plus some non-domestic premises) within Birmingham to the value of approximately £600m. It is proposing to use its Prudential Borrowing powers to provide £75m initially. Other named contracting authorities will be able to use the procured provider if they so wish for their properties. The Council is running its procurement using competitive dialogue, and was planning to issue its ISOS documents in November. We are aware that a number of other Core Cities and some groups of authorities are looking at similar options.
- Become a Green Deal Provider yourself: a self explanatory option.
- An un-funded model but offering support to Green Deal Providers: for example, the brand or reputation enhancement from the local authority may encourage owner occupiers to take up the Green Deal and may offer some support. But finding ways to support the initiative in your area may have to wait until the private sector market responds.
- Put in place a framework of suppliers: similar to above, working in your locality it may be appropriate to put in place recommended installers or the like (that will have to be accredited anyway) but that offer a quick and reliable route to getting work carried out.
- Leave it to the market: however, despite the interest on the Birmingham scheme, there remain some doubts as to how quickly or willingly the market will respond (and where they will respond) and the type of properties or owners they may seek out.
David Hutton is a partner and Patrick Sweeney is a senior associate in the Commercial & Infrastructure (Projects) team at Bevan Brittan. David can be contacted on 0870 194 8927 or by email at
- Details
Local authorities should consider playing an active rather than passive role when it comes to the Green Deal, write David Hutton and Patrick Sweeney.
The Green Deal allows energy efficiency measures to be installed at properties without owners or occupiers paying for these improvements immediately. It will revolutionise the energy efficiency of the nation’s homes and businesses, and will help people insulate against rising energy prices, creating homes which are warmer and cheaper to run. Now the Energy Act 2011 has received Royal Assent and the consultation on the secondary legislation has been published, this fledging industry can start preparing in earnest for the new scheme.
What is the Green Deal?
The Green Deal is established under the Energy Act 2011. It provides a framework whereby payments for the costs of energy efficiency improvements are recovered in instalments through energy bills over a defined period. The basis of this offer is the so-called Golden Rule that “estimated saving on bills will always equal or exceed the cost of the work”. The intention is that the Golden Rule can be applied to domestic properties as well as non-domestic properties.
The efficiency measures will have to be approved and the claimed bill savings must be accredited through the process.
The measures installed must have been recommended for that property by an accredited, objective adviser who has carried out an assessment, and the measures must be installed by an accredited installer. Householders will require the protection of the Consumer Credit Act and consent will be required from all relevant parties (e.g. landlord and the current energy bill-payer). The presence of any Green Deal Plan will need to be properly disclosed to subsequent bill-payers (new tenants or owners) as the liability (except for bad debts) will stay with the property.
Energy suppliers must collect the Green Deal charge and pass it on within the existing regulatory safeguards for collecting energy bill payments. There will be additional support for those in fuel poverty or hard to treat properties through the Energy Company Obligation (the "ECO") which is due to replace CESP and CERT.
Energy Act 2011
The Act contains the legal framework for the Green Deal, which will be launched in Autumn 2012.
The key elements are that it:
- removes the upfront cost of energy efficiency measures (like loft, cavity and external wall insulation, draught proofing and energy efficiency glazing and boilers), making expensive home improvement affordable. For the first time in the world, the energy saving work will be repaid over time through a charge on the home’s energy bill. The repayments must obey the Golden Rule;
- puts consumer protection at the heart of the Green Deal. High standards will be crucial from the first independent home energy assessment to getting the job done by qualified installers. All Green Deal participants will need to carry a “quality mark” so customers know they can be trusted to do a good job;
- provides extra financial help for the most vulnerable and hardest to treat homes by getting energy companies to fund work like basic insulation and boiler upgrades as well as helping those living in homes where the cost of the work, like solid wall insulation, may not obey the Golden Rule without extra money to make it affordable;
- improves at least 682,000 privately rented homes. From April 2018 it will be unlawful to rent out a house or business premises which have less than an “E” energy efficiency rating.
What next?
DECC issued its consultation on the details of the scheme on 23 November 2011, accompanied by six sets of draft regulations, the draft Code of Practice and draft Green Deal Arrangements Agreement, and draft amendments and modifications to energy company licences and industry agreements. The consultation closes on 18 January 2012.
The Government proposes that the Green Deal and ECO should begin in October 2012 so that there is no risk of a gap before CERT and CESP end on 31 December 2012, with transitional arrangements for the period when both old and new schemes are in operation. DECC aims to have the first tranche of certification bodies accredited by April 2012, with a second tranche in August 2012 so that their members have time to begin marketing their services prior to launch of the Green Deal.
Financing of the programme is a major issue. The current expectation is that an average domestic property may need approximately £7,000 spent on it. As the householder will not pay upfront the Green Deal Provider will need to finance this from somewhere. There is much talk of regional or national aggregators (the Green Deal Finance Company is gaining media attention) although how it will operate and whether it can attract the finance remain questions to be answered. The market needs to address the financing issues if the programme is to get off the ground.
One proposal is that energy companies should be able to jointly fund measures and receive full credit for the carbon or cost savings regardless of the proportion of funding that they contribute to its installation, with the aim of encouraging energy suppliers to both drive down delivery costs and to lever in supporting funding wherever possible.
The consultation paper also stresses how a key feature of the Green Deal is its flexibility. This includes flexibibility in financing terms, providing consumers with greater choice over repayment terms so that they can shorten the payback period or lower the instalments if they so wish.
Energy Company Obligation
The ECO requires the big energy suppliers to provide extra support for owners of hard to treat homes (Carbon Saving obligation), and the lowest income and vulnerable households (Affordable Warmth Obligation), so that they can benefit from the new arrangements. The consultation makes it clear that the Carbon Saving obligation is intended to focus on insulation systems for solid walls and that non-insulation measures will only be supported where delivered as part of a package that includes insulation for a harder to treat-property.
The Affordable Warmth element is designed to provide support to those low income and vulnerable households who are least able to heat their homes to an adequate standard and consequently most prone to suffering health or social detriment. Eligibility will be restricted to those households in receipt of certain benefits or tax credits who include an older person, a child or someone with a disability, and who do not have access to alternative sources of support to improve their heating arrangements; also social housing is excluded.
How can local authorities take part?
DECC initially commented that they thought the Green Deal would be delivered by the private sector but there has been a great deal of interest not just from local government but also housing providers. The consultation highlights how the role of local authorities and other local partners will be crucial in ensuring effective and intensive delivery of the ECO and Green Deal in particular areas.
So why should local authorities be interested? Local authorities may play various different roles within the Green Deal as a whole, including acting as Green Deal providers themselves. They can also act as partners for the ECO, adding value by, for example, providing information on local housing stock, and endorsing and helping market company activity, using their position as a trusted interlocutor with households to increase local acceptance and take-up.
In addition, new guidance under the Home Energy Conservation Act 1995 is likely to ask local authorities to report on how they plan to engage with the Green Deal and the ECO.
As a firm, we have has been appointed by Birmingham City Council to advise it and 39 other public bodies to procure a Green Deal delivery partner for the West Midlands region with an estimated value of £1.55bn.
There are a number of reasons why authorities might wish to play an active rather than passive role:
- as a means of dealing with their own carbon emissions. This is one of the major reasons behind the Birmingham procurement as the city has a commitment to reduce its carbon emissions by 50% by 2026;
- to address their non-domestic property estate; to support their residents in accessing funding and delivering Green Deal measures;
- to support their residents in accessing funding and delivering Green Deal measures;
- to support the growth (or maintenance) in their region for much of the surveying and installation work and thereby using it as a focus for jobs and skills.
What are the options for a local authority?
As Green Deal becomes more immediate we are aware that one size will not fit all. The Birmingham approach is but one.
- Birmingham have stated that they wish to procure a Green Deal Provider that will be able to deliver, in two phases, Green Deal measures to about 60,000 dwellings (plus some non-domestic premises) within Birmingham to the value of approximately £600m. It is proposing to use its Prudential Borrowing powers to provide £75m initially. Other named contracting authorities will be able to use the procured provider if they so wish for their properties. The Council is running its procurement using competitive dialogue, and was planning to issue its ISOS documents in November. We are aware that a number of other Core Cities and some groups of authorities are looking at similar options.
- Become a Green Deal Provider yourself: a self explanatory option.
- An un-funded model but offering support to Green Deal Providers: for example, the brand or reputation enhancement from the local authority may encourage owner occupiers to take up the Green Deal and may offer some support. But finding ways to support the initiative in your area may have to wait until the private sector market responds.
- Put in place a framework of suppliers: similar to above, working in your locality it may be appropriate to put in place recommended installers or the like (that will have to be accredited anyway) but that offer a quick and reliable route to getting work carried out.
- Leave it to the market: however, despite the interest on the Birmingham scheme, there remain some doubts as to how quickly or willingly the market will respond (and where they will respond) and the type of properties or owners they may seek out.
David Hutton is a partner and Patrick Sweeney is a senior associate in the Commercial & Infrastructure (Projects) team at Bevan Brittan. David can be contacted on 0870 194 8927 or by email at
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