Cut energy - it's the law!

The Energy Act is now law. Head of Sustainability David Frise explains why that matters and what it means to HVCA members.

The Energy Bill became the Energy Act on October 18. While an Act of Parliament might seem a bit remote from the real world of contractors, it is highly significant because it creates the legal framework for raising the financial support for the Government’s flagship energy efficiency project the Green Deal.

At the heart of the Green Deal is the availability of a significant cash loan for householders and small businesses to carry out extensive energy conservation measures on their homes and buildings. A modest rate of interest will be charged on the loan and the capital sum will be paid back over many years through a supplement on the normal energy bill for the house in question.

Subsidised
The benefit to consumers is that, with this upfront investment subsidised, they can start saving energy, carbon and money straight away.

As well as ‘fabric’ energy efficiency measures, like insulation and glazing, the Green Deal will provide upfront funding for improving building services, including new boilers and heating controls – in both residential and commercial buildings.

The Government believes that 3.9 million householders are considering refurbishment in the next three years. Many will consider replacing a bathroom or kitchen, prompting possible changes to the heating system – this is the most likely trigger for a Green Deal project. 

In total, 26 million homes and three million businesses will need to be refurbished between now and 2050, but in order to secure some of this work HVCA members will need to be accredited. The HVCA is currently lobbying to allow parts of the Inspection and Assessment regime to “deem to satisfy” so cutting the amount of time and effort it would take for HVCA members to get through the process.

The Green Deal will:

Remove the upfront cost of energy efficiency measures making substantial home improvements more affordable for consumers.

The energy saving work will be repaid through a charge on the home’s monthly energy bill. The repayments must obey a “golden rule” whereby the charge is no more than the expected savings, meaning householders should save from day one.

It will put 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”, which means they will have to be accredited. The HVCA is part of the consultation about the type of accreditation that will be needed.

The Green Deal will provide 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.

It will improve at least 682,000 privately rented homes. From April 2018 it will be unlawful to rent out a house or business premise which has less than an “E” energy efficiency rating.

Local authorities
A number of local authorities are gearing up to deliver Green Deal schemes themselves, including Birmingham City Council and a cluster in the North East led by Newcastle City Council. Financing could come via Government bonds, the Energy Saving Trust, the Ecofin Foundation, Marksman Consulting, the Climate Bonds Initiative, and tapping into utilities' ECO funds. Service delivery would be handled by local firms, providing much needed employment and training opportunities.

A Green Deal Finance Company is also to be launched next year, with big names signed up to it like British Gas, Carillion, Clifford Chance, E.ON, EDF Energy, Goldman Sachs, HSBC, Insta Group, Kingfisher, Linklaters, Lloyds Bank Corporate Markets, Mark Group, npower, PwC, RBC Capital Markets and Scottish and Southern Energy.

How could the Green Deal work for HVCA members?
It is unlikely that many consumers will choose whole house refurbishment  in one go.  The amount of hassle and disruption this would cause is greater than the perceived benefit.  Instead, likely trigger points such as a new bathroom or kitchen that will provide an opportunity for installers to upsell energy efficiency products such as heating controls.

For HVCA members an opportunity would arise where a boiler breakdown leads to a boiler change.  Here the customer could choose a high efficiency boiler as well as better controls and insulation, all of which could be funded through the Green Deal.

How big is this potential market?
There are 25.7 million households in the UK. Homeowners account for 70% of the population - 17.5 million households.  3.9 million householders are considering refurbishment in the next three years (22%).  Government statistics estimate 26 million homes and 3 million businesses by 2050 will need refurbishment.  With £15 billion of capital investment by the end of the decade.

Ernst and Young have estimated that the commercial market could be worth £800m by 2020.

The government call the Green Deal a “game changer” and if the financial forecasts are to be believed the market is well worth considering for HVCA members.

What is the HVCA doing to help members prepare?
At the moment the Green Deal is not a fully fleshed out scheme.  DECC (Dept of Energy and Climate Change) are due to publish the consultation document at the end of October.  Once this is published the HVCA will respond and develop guidance for members.

We will continue to work on shaping the accreditation scheme and are lobbying to make sure that I&A can help members achieve accreditation.

BESCA has applied to UKAS (the UK Accreditation service) to become Green Deal certification body again to reduce the burden on members should they wish to join the scheme.