Writing exclusively for BusinessGreen, Greg Barker sets out his vision for how the government's energy efficiency financing scheme can help slash UK greenhouse gas emissions

17 Jan 2012

For the Coalition Government, tackling climate change, securing our future energy supplies and making an ambitious transition to a low carbon, high growth economy is an urgent and vital task. Energy efficiency lies at the very heart of our strategy. It means being smarter about the energy we use - making the most of a precious resource and eliminating waste.

As families and businesses face rising energy bills , the cheapest energy is the energy we don't use. In a world of increasing energy prices, market volatility and reliance on imports, being efficient with energy has never been more important. Growing numbers of families and households are struggling to pay their energy bills. We estimate this year up to 4.1 million households will be in fuel poverty in England alone.

On top of this, the UK building stock is among the most inefficient in the world and responsible for 43 per cent of total UK emissions in 2009. Homes and businesses across Britain are wasting energy and money yet demand for energy efficiency measures remains low, as many people cannot afford the upfront costs or lack confidence in the quality of the work.

The vision for Green Deal

This is where the Green Deal comes in. It will be the biggest home energy improvement programme of modern times addressing the urgent need for a step-change in our approach to energy efficiency in existing domestic and commercial buildings. This will be critical to meeting our carbon emissions and fuel poverty targets. We are currently consulting on this ground breaking policy and the time window for applying closes tomorrow, so I urge anyone with any last minute comments to get them to us at DECC. The vision for the Green Deal and the new Energy Company Obligation (ECO) is an ambitious and far-reaching one. It's a world where the UK leads with a dynamic new energy efficiency market where the consumer is in charge, with nationwide brands, local businesses and community organisations competing to deliver the best proposition for the consumer. Under our plans, the Green Deal and ECO will support more significant energy efficiency improvements that have not been promoted before, and support green investment and economic growth. The results will be cosier, warmer homes with lower emissions and fewer families in fuel poverty. We estimate the Green Deal will catalyse £14bn of investment over the next decade, supporting at least 65,000 insulation and construction jobs by 2015. Insulation installers and others in the retrofit supply chain all stand to benefit from this long overdue energy efficiency makeover.

How will it work?

The Government is currently establishing the groundwork to enable private firms to offer consumers energy efficiency improvements to their homes, communities and businesses at no upfront cost, and recoup payments through a charge in instalments on the energy bill. The plan is for energy efficiency measures to be provided by businesses people can trust, installed by accredited professionals, and backed up with a legal framework. Customers will pay nothing up front as businesses will do that for them.

Once the property has been refitted, Green Deal providers will get their money back from the expected savings on energy bills over the lifetime of the measures. This is the big change. Through legislation the finance is tied to the energy meter so payments can be made not just by the current occupier, but by the beneficiaries once the current occupier moves out and moves on.

The Green Deal will be available whether people own or rent and, because it's not like personal debt, personal credit ratings are not a factor. The Green Deal offers landlords a real opportunity to invest in the energy efficiency of their properties at no up-front cost to themselves. Meanwhile tenants will repay the cost of measures through their energy bill savings, enjoying warmer properties without increased fuel bills. This is a win-win opportunity for landlords - making the property cheaper to run, more environmentally friendly and more attractive to rent.

Alongside the Green Deal, the Government is planning to replace the existing energy company obligations like CERT and CESP. The new Energy Company Obligation (ECO) will provide around £1.3bn a year to ensure everyone is able to benefit from the Green Deal, no matter what their income is or the type of house they live in. It will focus energy companies on improving solid wall properties, which have not benefitted much from previous schemes, and on improving the ability of the vulnerable and those on lower incomes to heat their homes affordably.

Delivering the Green Deal

To make sure the Green Deal gets off to a flying start, we need to ensure three things. Firstly, that we have the demand there in the first place so we're making £200m available when the Green Deal starts to provide introductory offers. Our legislation also provides a voice for tenants living in poorly insulated, draughty homes or operating from energy inefficient businesses. We will get tough so that by 2018 the poorest performing rented housing and business stock is brought up to a decent energy efficiency standard. This will provide another market for installers.

Secondly, that consumers can trust in the service and products. Trust is important when it comes to having work done in homes, so consumer protection will be built in from the word go. There'll be proper accreditation, a quality mark and insurance-backed warranties to prevent against rogue traders.

Thirdly, that the very organisations which have grass roots knowledge of homes and communities, like social landlords and local authorities, are working in partnership with the private sector. Local authorities could opt for a very hands on approach by becoming a Green Deal provider or partnering up with another provider. They might go door to door to help promote better energy efficiency and increase take-up of local offers. Regardless of how they choose to get involved we want to tap into the knowledge and influence they have in the local community so we can prioritise help for the poorest. We want to see more collaborative working, not just between Green Deal providers and local authorities but neighbouring councils working together, charities, voluntary organisations and community groups getting involved to come up with innovative solutions to rolling out energy efficiency on a street by street basis.

What's next?

The Green Deal will be a bigger national effort than putting on the London Olympics. Just as the Games are closing in the summer, we will be getting ready to kick-start an energy efficiency overhaul of homes and businesses across the country. I am looking forward to reading the responses we have received for our consultation, there's around 400 in the postbag already. It's an exciting time in the world of energy efficiency, and we are on the brink of a revolution to make homes across the country cheaper to run, cosier to live in and ultimately fit for the future.

^{Greg Barker is Climate Change Minister at the Department of Energy and Climate Change}