What next for the Green Deal?
As many readers will already know, The Green Deal was the UK’s flag-bearing green finance scheme, designed to assist British homeowners in improving energy efficiency and switching to greener energy technologies. It mitigated the need to pay large sums in advance, allowing people to receive a specially-formulated unsecured loan, which would be returned via utility bills over a period of years.
Unfortunately the original scheme can be considered a failure, and the UK government withdrew funding in 2015. In January 2017, The Green Deal Finance Company was bought by Greenstone Finance and Aurium Capital Markets, including its existing loan book with a value of over £40m.
Industry stakeholders pivot between hopeful and dubious about this rejuvenated scheme, which is due to kick-off in full this year. So, what does the future look like for The Green Deal?
The Green Deal’s future
The ongoing battle to expedite our transition to renewables and energy efficiency is real, and flies in the face of recent political turmoil and its impact on environmental policies. Despite a global slowdown in green energy investment, the UK remains a receptive market. An initiative like The Green Deal can (and should) be successful, but this requires careful positioning and meticulous attention to detail.
One thing’s for certain, experienced City investors can spot an opportunity when it arises. I recently interviewed the Green Deal Finance Company’s CEO, Kilian Pender. I asked him why he stepped into this role after roles at hedge funds and investment banks.
“With 27 million homes in the UK, the vast majority of which fall into categories C and D in the EPC range, working in the renewables and home energy efficiency sector presents a huge opportunity to address a systemic problem. Issues such as the MEES Regulations which are coming in in April 2018 make it a particularly exciting time to be part of this industry. Having a background in corporate finance and corporate strategy is also particularly important in terms of the future possibility for scaling the business; over time we want to see it grow and develop to become the definitive platform for consumers in the UK in the home energy efficiency space.”
I also asked Kilian about where the focus has been in the initial months since the takeover, and what the long-term ambitions are for the evolution of The Green Deal.
“Our approach and focus for 2017 is on improving the Green Deal Finance Company products and service offering to customers – including the route to market, customer experience and quality control. Over time we hope to scale up the offering significantly and our eventual aim is to become the leading platform for consumers in the UK in the home energy efficiency space. But we are in no rush and our focus is on quality control and getting this right, as we are here for the long-term.”
The new CEO has some interesting insights about how the company can address the major challenges in generating success with The Green Deal, especially since the initial scheme fell flat. Most people agree that this is a worthwhile initiative in pushing green development, but doubts remain about whether the public is ready to embrace such a scheme. In his opinion, this has much to do with getting the message out there in the most effective way.
“The challenge has always been communicating the benefits of investing in energy efficiency to consumers in a way that resonates with them, as the environmental benefits are unfortunately often met with a certain level of apathy. For the most part, a homeowner’s number one concern is the comfort of their home, so proper investment in marketing and communications to explain to consumers that energy efficient homes amount to warmer, more comfortable homes is really important.”
One of the most popular energy saving measures, after loft insulation, is external solid wall insulation. Although it comes with a high upfront cost, there are numerous benefits of external wall insulation and this is one of the measures that could become even more popular with the help of the Green Deal.
And what about the doubts which remain among UK homeowners themselves?
“Rebuilding the public’s trust in the quality of service and the reliability of the installers we work with is also crucial, so we’ll be ensuring quality control across the entire supply chain, by vetting installers, using third-party spot checks, and making sure we only work with those who can adhere to our high standards.”
Kilian also mentions another major barrier to business growth in particular; the red tape which limits the size of lending packages. This, he says, may be a barrier to widespread change. He argues that steps must be taken to ensure that companies are able to service the requirements of consumers without restriction, which he argues is largely undue.
I also asked industry players about what they’d like to see changed with the new Green Deal. One interesting request was for a clear communication channel to exist between the organisation and funders, through which clear, defined, and agreed qualifying criteria could be conveyed. This would be effective in allowing funders to discuss or query any grey areas, and would mean that notifications on criteria changes can be reported quickly without room for interpretation (and the resulting discrepancies).
The Green Deal always had a lot to offer, but never quite realised its potential. What remains is the absolute necessity to improve the energy efficiency and use of renewables in of UK properties - both domestic and commercial. This is an unstoppable truth, and must be achieved by whichever means necessary. Kilian Pender is certainly right in saying that it’s a communication issue - but this is part of a broader set of challenges.
Together with marketing and communications barriers, the new Green Deal must surely address practical and administrative inefficiencies. As well as maximising buy-in from the public, all stakeholders need to have trust in the scheme and its way of working. Lessons will certainly be learnt from the demise of its predecessor, and the people in charge certainly have the nouse to make it a success, not to mention the determination and experience to turn a risk into reward.
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