As the Prime Minister is reportedly reviewing the coalition’s flagship Green Deal, we want him to take this opportunity to make big changes to ensure this scheme turns out to be a good deal for consumers.
The main problem is that the savings on energy bills, promised to consumers, may fail to materialise. This is a real possibility – although there will be a personalised assessment, the amount a Green Deal company can lend a consumer won’t be calculated taking into account their actual energy use, it will instead be based on average figures.
Whilst the Green Deal ‘Golden Rule’ promises that consumers will not pay back more in their regular payments than they end up saving on their bill from using less energy, no one is guaranteeing this and there is no redress if consumers end up paying more than they save.
Which? is also worried that companies providing the Green Deal (home improvement, energy and finance companies among others) will have every incentive to sell a number of home improvement measures, some of which may not be covered by the Green Deal. This could make for highly complex and confusing financing.
Which? has five challenges to improve the Green Deal to make it fairer and more attractive for consumers:
Green Deal savings must be tailored to people’s actual energy use – Green Deal savings estimates should be based on tailored assessments of peoples’ individual circumstances, such as how many people live in the property, and the actual energy they use rather than standardised, average figures for a typical household and property type.
The Government is proposing that savings are worked out using the Energy Performance Certificate (EPC) which uses standardised average figures and could mean in some cases that estimated savings are much higher than they would be in reality. An occupancy assessment which is personalised to actual household energy use will also be used but only for information – it won’t define the size of a Green Deal loan. Green Deal assessors who work out the size of the loan and whether it meets the ‘golden rule’ are not independent as they are employed by the companies who will provide the Green Deal, so they are likely to want to lend the maximum amount possible under the EPC. Which? wants the occupancy assessment to be used to calculate Green Deal savings.
The Green Deal must not be a licence to mis-sell – There is a real risk that consumers will be sold products that they don’t want or need because the government has said that companies can use the Green Deal as an opportunity to sell other home improvements not related to energy efficiency. However, consumers could be bombarded with confusing advice and it won’t be clear to them what they can pay for through the Green Deal and what they can’t. Which? is calling for a ban on cross-selling non-Green Deal items on credit.
There must be no harsh penalties for early repayment – Plans to amend the Consumer Credit Act for Green Deal loans of 15 years or more are a significant concern and could mean that consumers face a significant penalty if they want to repay their Green Deal earlier than planned. Future buyers of their property might want the Green Deal paid off before completing a sale. Which? believes the existing protections offered by the Consumer Credit Act should apply to the Green Deal just as they would to any other loan.
Green Deal quotes must be clear and comparable – It should be easy for consumers to compare quotes for different Green Deal loans and other finance options on the market. Which? wants clear information for consumers that outlines at every stage the different costs and savings, including the cost of finance so that consumers can compare the Green Deal with other forms of credit.
The Energy Company Obligation (ECO) must be fair to all and cost effective for consumers – the ECO will be launched alongside the Green Deal and will be used mainly to subsidise solid wall insulation, which many homes need. However, because the ECO will be paid for out of energy bills, all consumers will be paying for this subsidy and therefore all consumers are paying for some people to have expensive insulation installed. This is difficult to justify when many are already struggling with high energy bills. It would be fairer to allocate more of the ECO to help fuel-poor homes and people who are really struggling with high energy bills. Which? would also like to see greater investment in low cost measures like loft and cavity wall insulation that will have a big impact on reducing people’s energy use and bills.
Which? executive director Richard Lloyd said:
“It’s right that people are incentivised to be more energy efficient and we welcome help for people to install energy saving measures in their home. But the Green Deal needs to be a good deal for the consumer at the same time. There must be fairer terms of finance, stronger protection on sales and marketing practices and more accurate savings estimates. Too many of the Government’s policies won’t be effective at reducing energy consumption and instead are likely to lead to huge hikes in energy bills for consumers. People are already struggling with their household bills so they simply cannot be expected to pick up the tab for ill-thought out policies that won’t work.
“Without significant changes we are unlikely to be able to recommend the Green Deal to consumers. With the launch just months away, our message to the government is clear – time is running out to rescue the Green Deal.”