The Green Deal: our guide

justin schamotta
By Justin Schamotta

thermo house©

The Green Deal was launched in 2013, offering homeowners a way to pay for energy efficiency improvements like double glazing, insulation, a new boiler or even a micro energy generation system.

But in July 2015, the Government announced that they would no longer be funding the scheme. At best this left the scheme in limbo, but many saw the announcement as the death knell for the programme.

There were two parts to the Green Deal. The main component was a very specific kind of loan; the second was the headline grabbing grant system, known as the Green Deal Home Improvement Fund (GDHIF). Both were used to fund home improvements that would help reduce energy use - and therefore energy bills.

But while the Government said the deal was "very generous", it didn't benefit everyone.

Five things you need to know

The Green Deal was criticised for being overly complicated right from its launch in 2013.

By the time funding was halted in July 2015, the total number of agreed Green Deal loans over the two years of the scheme was just 15,600 - somewhat lower than the 200,000 applications that were expected each year.

In comparison, more than 25,000 households had applied for and received a Green Deal grant before the third round of funding was announced in March 2015.

So how did the Green Deal loan system work? We condensed it to five key points that anyone thinking about getting one of these loans should know.

1. Basically, it was a special kind of loan

The thinking behind the Green Deal was that when homeowners were provided with more energy efficient technology, their fuel bills would fall. This saving could be used to pay for the cost of getting the work done in the first place.

So, the Green Deal was a kind of loan. Just like a personal loan, it was subject to interest - typically around 6.9% - and a repayment term of between 10 and 25 years.

Those who have a Green Deal loan will tell you that it differs from a conventional loan in several important ways, though.

First, the homeowner doesn't pay back the loan directly: their energy company does it for them through their bill.

Second, the loan doesn't "belong" to the homeowner, but rather to the property, and more specifically, the electricity meter. Should the homeowner move, the loan will stay behind with the house, to be paid from the electricity bill of the next person to live there.

Basically: anyone who sells their home also has to sell their loan.

Third, a Green Deal loan's repayment terms are worked out based on an estimate - albeit an intelligent, expert estimate - of how much the home improvements will increase efficiency.

In real terms, the homeowner wouldn't really notice much financial change at first: they would be highly likely to be paying the same amount on their energy bills every month, as the savings would be negated by the loan repayments.

It would only be once the loan was paid off that the householder would see their bills drop significantly.

2. But it was based on an estimate

Of course, it's difficult to be 100% accurate about how any improvements will affect future bills.

Everyone who applied for a Green Deal loan or grant had to get an assessment from someone trained in installing energy efficiency improvements.

It's the assessor who decides which improvements will work and, crucially, how much money they will save the household in energy bills. But they're advised to be very conservative when providing estimates of potential future savings, and must also factor in future energy price rises.

If all goes well, homeowners should easily be able to save enough on bills - and possibly even more than they need - to pay the Government back within the agreed period of the loan.

Unfortunately, it can also go the other way, and households may find they aren't making big enough savings to cover the repayments in their bills.

It'll therefore take them longer to repay the loan, and longer before they see any real difference in their monthly energy bill.

Assessing future energy savings is a tricky business so this estimate is extremely important to get right.

3. You had to pay for the estimate upfront

As we noted above, estimates were given by highly qualified people, who would be part of a recognised Green Deal Assessor Organisation. They would call at a customer's home upon request.

They then identified where the house was wasting energy, what could be done about it, and the likely cost. They then provided a report containing their findings and declaring any links with particular Green Deal providers.

It's not easy...
being green with an energy supplier.

If homeowners liked what they read, they could take the report to various approved providers to get quotes for the work and arrange finance.

When everything was agreed, the homeowners would sign the Green Deal Finance Plan, entering them into the contractual loan arrangement with the provider.

Assessments typically cost between £100 and £150. At first the upfront cost was a real barrier to people interested in getting a Green Deal loan: after all, the assessor could easily turn around and say that improvements weren't suitable.

But in mid 2014, it became possible to claim back up to £100 of the cost of the assessment through the GDHIF, which made it much more popular.

In fact, speaking to the BBC's Today programme shortly after Government funding was halted, former energy secretary Ed Davey said "hundreds of thousands of people" had taken up the assessment portion of the Deal.

4. The loan was not the same as the grant

As we mentioned in the introduction, there were two main components to the Green Deal, the loan and the grant, or Green Deal Home Improvement Fund (GDHIF).

The GDHIF was in many ways a victim of its own success, with millions of pounds snapped up rapidly whenever a fresh round of funding was announced.

The grant helped to cover at least some of the cost of carrying out energy efficiency improvements. Somewhat confusingly it could be used alone, or in conjunction with a Green Deal Finance Plan.

It actually worked out as far simpler for those who had already agreed to a Green Deal loan, as they could apply for a voucher retrospectively - and claim back some of the cost of the work already done.

Anyone pinning their hopes on a grant alone had to go through a much more stop-start process. First they would get an assessment, as discussed above, and obtain a quote for any work that was recommended.

They then had to call a halt to proceedings while they applied for the Home Improvement Fund voucher. Work could not be carried out until a grant had been agreed - but even then, the money wasn't forthcoming straight off.

For that, applicants had to get the work completed, and get the installer to sign their voucher, before returning it to the government for payment.

The amount people could receive in their grant depended on what improvements they were planning.

The maximum anyone could claim was £5,600, made up of:

Most homes built after about 1930 have cavity walls, so a large number of grants were requested for installing two measures from the approved list, which is as follows:

5. It wasn't the only way to improve efficiency

For all it was confusing and complicated, the Green Deal was a positive step in tackling the woeful levels of energy inefficiency in UK housing stock.

But homeowners - and others - could also take advantage of a raft of other (much simpler) measures to improve efficiency and cut their monthly energy bills.

The simplest and most overlooked is switching energy supplier or tariff. Find out more about that on an individual level here.

There's also money available for community projects focused on reducing energy bills and promoting green energy alternatives.

Those in receipt of certain benefits can claim for free insulation and even a new boiler through some energy companies, which we cover in this guide, and more on covering the cost of energy bills in the meantime here.

Making small changes in behaviour or getting more efficient appliances can make big differences too. Read more in our energy efficiency guide.

What if I had a Green Deal plan or voucher?

The good news is that anyone who already has some form of Green Deal agreement - whether a loan, or an application or voucher with the GDHIF, is unaffected.

As long as work is completed and vouchers redeemed by the expiry date, the grant money already assigned to a household will be forthcoming.

In fact, when the Government announced they were ending funding, there was still £4 million in the GDHIF to be allocated, which would remain available to those applying for help with two measures before September 30th 2015.

And as we mentioned, while many have seen the end of Government funding as the absolute end of the Green Deal, the Government were keen to point out that the framework is still in place and another source of funding could well enable it to continue.

One thing that will probably continue for some time is the amount of "Green Deal" related spam and nuisance calls we're subjected to.

Those who are genuinely interested in making efficiency improvements should make their first port of call the Energy Saving Trust or their local equivalents - contact details can be found here.

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