22 September 2011 | Alan Bouquet
Energy, Finance/insurance, Legislation, Europe

 

Cavity wall insulation is one method that will be part of the scheme

A not-for-profit organization, set up by energy suppliers, construction firms and financial institutions is to offer low cost loans to those who wish to take advantage of the UK government’s Green Deal energy efficiency scheme. The scheme is launched in October next year and is to allow households and businesses to introduce energy efficiency measures with no up-front cost. The firm is designed to minimise these costs by aggregating and refinancing the loans.

The scheme will allow participants to install energy efficiency measures up to £10,000 such as cavity wall insulation, light fittings, innovative boilers and efficient faucets in their properties. The scheme will also allow certain energy production as well, as long as the installation reduces energy cost and will therefore pay for itself. This could include solar PV, biomass boilers and micro CHP.

The DECC outlines 3 steps to determine what is suitable for the scheme, is the measure eligible, is it suitable for the property involved and does the measure meet the Golden Rule – i.e. will the scheme save money for the property? The funding given is based on the last step. The recipients then pay back the loan in their energy bill, which will total less than their standard bill, due to the savings involved.

The government is planning to introduce the scheme at commercial rates of interest and the new not-for-profit will look to keep the service as cheap as possible, to maximise savings for householders. This will mean an interest rate of about 6% compared to high street rates of 10-15%.

The DECC is welcoming the initiative, which realises that low cost loans will be imperative to the schemes success. “DECC is aware of, and is welcoming, the formation of a national not-for-profit company whose purpose is to minimise the underlying finance and administration costs of all Green Deal through aggregation and refinancing, seeking the highest possible investment grade,” says Edward Course, of the Green Deal finance team.

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