Thoughts on the demise of Green Deal

So farewell then, Green Deal, after a short but not particularly sweet life.

Last week, the Government announced that it would no longer fund the Green Deal Finance Company, the predominant source of funding for Green Deal plans, effectively cutting off finance to the sector.

From twinkle in the eye to the difficult birth

It’s been a long and interesting journey since an Energy Efficiency Partnership for Homes meeting in about 2006 or 2007 where I first heard the idea of Pay As You Save approaches to energy efficiency.

Conceptually, it was and is a thing of beauty. Receive the benefits of energy efficiency – comfort, reduced costs, lower carbon emissions – without the upfront capital costs, through a loan mechanism paid off through the savings on your energy bill.

Unfortunately, the journey from concept to reality took a number of detours, each of which added a new layer of complexity. How about we tie it in with installer accreditation? How about we link it to the RHI and to ECO? How about we create a golden rule that is more like a rusty harness?

So lesson number one for future policy deliver: elegant concepts will thrive with simple design.

And lesson number two: don’t ask one policy to achieve every objective you can think of. Focused policy delivers focused results.

Green Deal grows up and gets some friends

Across the UK, thousands of businesses were attracted to the promise of the Green Deal market. Positive rhetoric from Greg Barker – a great champion of energy efficiency – led us to believe that THIS was the thing that would bring energy efficiency to the masses. When the market didn’t materialise (for a number of reasons, some of them industry’s fault), those businesses were left counting the cost of their sunk investment.

How many times can governments (past, current and future) cry wolf with the energy efficiency industry? The same group of people who trained as Home Inspectors, and then as Domestic Energy Assessors, and then as Green Deal Assessors must be wondering what on earth all those hours of training and costs for accreditation were actually for. Stopping and starting mechanisms which are actually helpful – home energy assessments are a great tool for informing consumer choice – risks alienating the skills base, making it much harder to scale up the industry to what we need to achieve our long term carbon and fuel poverty ambitions.

Lesson number 3: look after your friends because one day you will need them.

The positive legacy of Green Deal

Speaking of home energy assessments, there’s a further risk from the demise of Green Deal: throwing the baby out with the bathwater. Assessments are a Good Thing. Enabling customers to enjoy the benefits of energy efficiency without the capital barrier: a Good Thing. Building competition in the market for the provision of energy efficiency services: a Good Thing. Increasing quality standards through certification and accreditation: a Good Thing.

Lesson number 4: let’s make sure we take forward the Good Things that Green Deal either created or built upon.

What’s in a name?

Previous policy interventions in the energy efficiency space had atrocious, bureaucratic names (the Carbon Emissions Reduction Target? The Energy Efficiency Standards of Performance?). And yet, they trundled along, doing what they were supposed to do (mostly).

Take the Feed-in Tariff – horrible name, massive market success.

My point here is this: with Green Deal, Government tried to create a brand, a movement if you will. It was Green and groovy (even though householder concerns had shifted more to money saving than green issues) and it was a Deal (and we all love a Deal…. except, it seems, when it’s at 8% interest).

Mechanisms and subsidies are great: they help address market failures in the interests of the public good, and they help accelerate the development and uptake of emerging technologies.

So, lesson number 5: please, Government, keep creating mechanisms and subsidies in energy efficiency as the prop to enable the sector to develop and thrive. Do not, however, try and brand them. Leave that to the marketeers.

It’s not all Green Deal’s fault

Speaking of the marketeers: from the very early days of Green Deal (and in fact through my thirteen years in the energy efficiency sector), I’ve wittered on about the need for better marketing of energy efficiency.

Sometimes the marketing clicks into place: the combination of high subsidy, good social housing take-up, targeted private sector marketing and rising concerns about energy prices and climate change helped propel the solar PV industry towards a nearly subsidy-free existence.

With Green Deal: it simply didn’t work that way. The marketeers spent part of their time selling assessments, then selling different measures (including some like solid wall insulation that have a miniscule amount of consumer awareness), then selling finance packages.

Imagine if someone showed up at your door and wanted to sell you a form of transport that would reduce your fuel bills, improve your wellbeing and benefit the wider environment. Sounds good. In fact, it sounds very like a bike.

But what if they then said: you’ll need a two hour travel assessment with an independent expert, who will produce a report for you, with recommendations about a combination of variables (wheels, gears, adjustable bits and pieces, colours, fixtures, extras, storage, locks) and their costs. Your purchase can then be financed through a loan which you can take out for a proportion of the value of the new bike based on the amount of petrol consumed in your old car.

Sigh.

Giving the marketeers some credit: they were responding to the whims of the market and the shifting landscape of Green Deal Communities, Green Deal HIF, ECO, Uncle Tom Cobley and all.

So, lesson number 5: let’s all spend more time and effort understanding the consumer offer arising from a policy.

And lesson number 6: markets take time and focus to build. With so many other incentives brought into the market, things became very confusing – for the supply chain and for the consumer. It was almost impossible to answer the question “how much funding can I have?” beyond saying “that depends”. And with ECO providing an easier and more established route to market for a lot of the sector (“Free measures! Free measures!”), it’s no surprise that the industry perhaps lost a bit of faith in Green Deal and chased after the easier sell.

Gone but not forgotten

Last but not least, let us remember that there are 10,000 Green Deal Plans in place, another 5,000 going through the system (though would you sign one now?) and a number of Green Deal Providers out there wondering what to do with their businesses.

Some may find alternate funding sources and be able to offer more attractive low interest loans direct to householders, freed from the golden rule and the other bureaucracy of Green Deal. Some will wait and see: will the Government announce a new fund for low interest loans? Unlikely. Some will simply switch off the lights and lock the doors on the way out.

And what are the implications for the Green Deal Plans and finance packages already in the system? What protection in place for the 10,000 over the 25 year lifetime of their plans? Would it be cheaper and cleaner to simply write off those loans rather than continuing to administer them over their lifetime? Discuss.

Rest in peace, Green Deal. It’s been interesting.