Friday, 26 May 2017

The phantom deal

Thousands of households have been assessed since its launch in January, but when Simon Brandon went looking for a completed green deal, the evidence was elusive

For the inhabitants of the many older, British homes with all the heat retention properties of a sieve, our most recent and horribly persistent winter must have seemed even longer.

But in January this year, the government appeared to be riding to their rescue.

The twin planks of the government’s domestic energy efficiency programme, the green deal and the energy company obligation, both launched officially that month.

While it might sound heavenly, however, the green deal has seemingly been stuck in limbo ever since - although energy companies have already begun improvement works under the ECO umbrella. Social tenants are first in line to reap the rewards of these programmes, thanks to the ways ECO incentivises those energy companies charged with meeting a set of targets to save carbon and make homes cheaper to heat.

In fact, ECO is already making a big difference to the lives of social tenants (see box: ECO warriors); but Sustainable Housing was not able to find evidence that its sister programme has improved the energy efficiency of a single household.

Deal or no deal

So is there even the ghost of a chance of seeing fully fledged green deals any time soon - and will the slow progress so far come back to haunt the government? Interest from the public has certainly been high so far, and the number of green deal assessments carried out - where a property and its residents’ energy efficiency are audited to see what improvements can be made under the scheme - had reached 18,816 by the end of April, according to the Department of Energy and Climate Change.

But following that initial assessment, householders have been left twiddling their thumbs. According to The ENDS Report, around 100 people have signed up for green deals so far, but Sustainable Housing was not able to find evidence of any work being carried out. Providers large and small told us they are waiting for the Green Deal Finance Company, a not-for-profit business set up with £244 million of funding to do as its name suggests, to get up and running.

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Samantha Gandy, pictured with her son Callum, whose house is one of many on the Camp Hill estate in Nuneaton that had external wall insulation installed through the energy company obligation

Sofie Pelsmakers, an architect and author living in London, is one such example. In March this year, Ms Pelsmakers took Haringey Council, in north London, up on its offer of a free green deal assessment on her mid-terrace Victorian property.

‘I was impressed how smooth it was,’ she says. ‘I contacted the council and within a few days I had been assessed.’ The assessor recommended external wall and underfloor insulation, suggesting she might be eligible for ECO top-up funding too.

That’s about the limit of Ms Pelsmakers’ praise, however. The next stage was to send the assessment to green deal providers for quotes on the work.

Ms Pelsmakers contacted 40 out of a total of 52 that have registered nationwide. ‘You have to call or email each one separately,’ she says. ‘That was incredibly frustrating.’

And although she has received responses from around 60 per cent, at the time of writing in early May, not one provider is ready to carry out any work.

‘So here I am, ready to get quotes, or to see what ECO funding I might additionally get, but I’ve had nothing,’ Ms Pelsmakers says. ‘I have no idea what it will cost.’ Green deal providers and installers are also frustrated by the lack of momentum. Andy Johnston is chief executive of Local Energy, a green deal provider based in London. He says the ongoing process of registering fully as a provider is not without its hurdles.

‘The bureaucracy is really quite Byzantine,’ he says. ‘Getting access to the [green deal] database is proving so fiddly that I keep walking away from it.’

Then there’s the finance. ‘The big issue is that the money is still not available,’ says Mr Johnston. He expects to be able to begin work in June this year once the loans are made by lender the GDFC.

It’s not only smaller providers who have been waiting on the finance. Last year Carillion Energy, a subsidiary of 50,000-employee multinational Carillion, partnered with Birmingham Council in a venture called Birmingham Energy Savers to deliver green deal improvements across all tenures in the city. This year the partnership has already installed improvements in 563 residential properties city-wide, but those have been paid for from a £12 million government fund intended to kick-start green deal activity in seven English cities alongside ECO, and are not pure green deals.

‘We’re ready to go now, and that’s been the benefit of using [government funds] - the supply chain is there, ready and waiting,’ says Roy Wallington, relationship director at Carillion Energy Services.

To date, BES has carried out 447 green deal assessments in Birmingham. As with Local Energy, its final hurdle has been accessing finance.

Money worries

That money is in the hands of the GDFC, the new not-for-profit body set up to provide credit to green deal bill payers. Asked why existing banks don’t perform that function, the GDFC’s chief executive Mark Bayley offers a good explanation as to why there have been a few teething problems.

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Homes on the Camp Hill estate before (left) and after ECO-funded external wall insulation (right)

‘This is an entirely new legal, commercial and operational framework we have set up,’ Mr Bayley points out. ‘The thing about the green deal is it’s only the bill payer who is the borrower. That’s very simple to tell a consumer, but… offering credit that sticks to a property rather than a person has never been done before. We are playing with consumer credit, and we have to get it right.’

The interest rate that residents taking out a green deal will be charged - around 7 per cent - have also been criticised, but so far it is too early to see if it will put people off.

Plugging the GDFC into energy companies’ billing systems has been another tricky piece of the puzzle. And the length of loans offered at fixed rates by the GDFC - from 10 to 25 years - is far longer, Mr Bayley adds, than loans offered by high street lenders.

Things are moving forward, however, albeit slowly. A spokesperson for DECC says the GDFC’s systems are up and running, and that its fund - currently the GDFC has £244 million to spend in its first year - is now available to providers. Mr Wallington confirms that BES is, as of early May, signed off with GDFC and is now able to access its cash.

Front of the queue

That’s not all the good news: the GDFC signed its first green deal plan (the loan agreement) with a householder in early May. Neither the GDFC or DECC will give any more details, citing confidentiality, but it’s certainly a milestone. DECC says it will publish full statistics in June.

By comparison, ECO work is now well underway and it has already having a positive effect on the wallets and neighbourhoods of social tenants. This is largely because in ECO terms, social housing is low-hanging fruit as far as the energy companies are concerned. Daniel Grealy, senior building manager at Nuneaton and Bedworth Council, explains: ‘With a local authority there is a large number of similar properties, all of the same construction type… So the work becomes quicker and more efficient.’

The scheme is targeted at areas of high deprivation and low income, which often coincide with social housing. And it’s much easier, faster and cheaper for the energy firms to deal with one landlord overseeing multiple properties of the same type than it is to door-knock individual homes.

On top of that, the big energy companies will be keen to make some early gains after several missed their targets under ECO’s predecessors, the carbon emissions reduction target and the community energy saving programme (Inside Housing, 2 May). At stake are fines that could be as large as 10 per cent of each company’s global turnover.

‘That is a good thing that has come out of it,’ says Ms Pelsmakers. ‘The low-hanging fruit turns out to be the right kind of people.’

Meanwhile, she and thousands of other residents - the green deal is open to social and private tenants, with the landlords’ approval, as well as owners - are still waiting for the green deal to start delivering on its promises. At least now the winter is finally over, those hard-to-heat homes shouldn’t inconvenience their inhabitants for a good few months yet. The time to start shaking on some green deals, however, is now.

The green deal and energy company obligation explained

The green deal is the government’s flagship domestic energy efficiency scheme.

Following an assessment of their and their properties’ energy usage, householders can borrow money to pay for improvement works such as insulation or double glazing. They pay the loan back through their utility bills. If the residents move house, paying back the green deal is taken on by the people who move in.

All green deal work must conform to the ‘golden rule’, which states that the loan repayments must be equivalent to or lower than the savings generated by the improvements. This means green deal adopters shouldn’t notice any increase in their utility bills.

The energy company obligation sits alongside the green deal and does as its name suggests: the UK’s ‘big six’ energy companies must fund and carry out energy efficiency measures, based on targets set by the Department of Energy and Climate Change, in low-income areas and hard-to-treat properties.

ECO provides free or cheaper energy efficiency improvements to low-income and vulnerable households and communities, and it also overlaps with the green deal as a top-up subsidy for properties in eligible areas where green deal improvements do not meet the golden rule.

ECO warriors

The town of Nuneaton in the west midlands isn’t as unprepossessing as it first appears. ‘It’s the only town with a ring road right through the centre,’ says Yvonne Davies, asset manager at 5,000-home landlord Nuneaton and Bedworth Council.

Now the town has another feather in its cap. It is hosting one of the first pilot schemes - run by ‘big six’ energy company E.on - to trial the energy company obligation scheme.

There are three distinct targets within ECO’s mandate. The one E.on is aiming for in Nuneaton is the carbon saving community obligation, which targets domestic users in low-income areas. The CSCO requires the big six energy companies to save a total of 6.8 million lifetime tonnes of carbon a year between them.

E.on and the council have already improved hundreds of properties under the government’s previous energy efficiency scheme, the community energy saving programme. This ended in December 2012, and ECO began on
1 January this year.

‘The customers would have seen little difference [at the switchover], but from a reporting standpoint the impact of switching from CESP to ECO midway through a project was that we were effectively installing blind for some time as the government was still writing the rule book,’ says Andrew Barrow, a spokesperson for E.on.

‘ECO is an entirely different obligation to those [in the] past, with greater complexity and scale,’ he adds. ‘The danger was that everything would shut down while everyone gets to grips with the new rules.’

Happily that hasn’t happened.

Ms Davies and I are visiting Camp Hill, one of the most deprived areas in the district, to see what difference ECO and its forerunners have made.

The older social properties on the estate are built from energy-inefficient solid concrete slabs. ECO, and CESP before it, is funding external wall insulation to keep the heat in. A foam shell several inches thick is attached to the properties’ exterior walls, which are then rendered and painted white or cream.

At Camp Hill it is easy to compare before and after. It’s a regeneration area, and a large chunk of new residential buildings and shops now appends the old terraces on which the ECO work is underway.

The freshly painted external cladding glows in the May sunshine. A few privately owned - and as yet unimproved - properties stick out among the white terraces like stained teeth in a Hollywood smile. ECO funding is available to all the properties in the area, but dealing with individual owners rather than just the one local authority housing department takes time.

It’s a beautiful day and a few of the local residents are soaking up the sunshine in their front gardens. ‘It’s fantastic. Unbelievable,’ says council tenant Samantha Gandy. The long winter has at least given occupiers of newly improved homes a chance to compare their fuel spending before and after the works. Ms Gandy says her weekly gas bill dropped from £45 to £12 following the installation.

That’s not the only benefit she has to report, however. ‘People take a lot more pride [in their homes] now,’ she says. ‘The street looks better for it.’

Across the road, a man is painting his garden fence. ‘It’s definitely one of the best things the landlord’s done,’ Ms Gandy adds. ‘We blend in with the new houses too. Camp Hill looks nicer.’

Her sentiments are echoed by neighbour Kerri Pritchard. ‘They don’t look like crappy houses anymore,’ Ms Pritchard says. ‘It looks more like a village now. It’s a million times better.’

Ms Pritchard’s gas bill dropped from £25 a week to £12. ‘It has cut my energy bills and it looks fabulous. I wasn’t best pleased when they were doing it,’ she adds, ‘because the men left tins of food in my garden. But to be fair they did it really quickly. It only took two weeks.’

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