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The Green Deal explainedMarch 2012

Government is pumping money into the refurbishment market to green the existing building stock. Andrew Eastwell describes how the system will work.

Andrew Eastwell, Chief Executive (September 1998 - April 2014)

The Coalition's Green Deal has laudable objectives: it aims to green the existing building stock by providing financial support for a range of low carbon measures. Primarily, it's a means of financing (rather than grant aiding) the upfront cost of applying a wide range of energy saving measures and technologies to both domestic and non-domestic buildings.

The cost of the measures will be financed by applying a pre-agreed charge to the building's electricity bill. This cost will be calculated to be less than the savings achieved by the measures applied. This is known as the 'golden rule'.

The length of the repayment period can be adjusted to make the golden rule work. In some cases the repayment period could be 25 years. As the repayment is attached to the building's electricity meter, any remaining debt will be inherited by the next owner of the building, who must continue the repayments on the same terms.

In a nutshell that is how it is intended to work, but as can be imagined, the actual implementation is a good deal more complex. Some critical issues have yet to be fully resolved. Here are some of the more important features of the scheme, together with their associated issues.

The qualifying improvements

Government has issued a list of Qualifying Improvements. The estimated savings from these measures and improvements have been included within new versions of RDSAP for dwellings, and SBEM and other compliance tools for non-domestic buildings.

The software will model the building (and some lifestyle factors) and will rank the best options for inclusion in a refurbishment. It is expected that more than one option will be selected for any given building. The output will be a prescription that the building owner can use to get quotations from contractors for the works.

There are a number of issues that need to be resolved. The first is a fundamental shortage of hard data on the as-installed perfor mance of many qualifying measures. The complexity of multiple measures and their interactions are also not well understood.

Very poorly insulated or serviced buildings may mean that occupants could accept a comfort gain rather than an energy saving. A major issue is that the mechanisms for including wider scheme measures don't yet exist.

The Green Deal is designed to promote the uptake on energy efficient systems and products, such as biomass boilers. In many cases this may be done as a loss-leader by companies also installing the equipment.

Performing the assessments

Assessment can only be done by a competent person who has been trained and is certificated to carry out the assessment. Think of it as a super-energy assessor providing Energy Performance Certificates (EPC). Assessments will not be free, but in many cases may be done as a loss-leader by companies also providing the installations.

Certification of the assessors will be carried out by UKAS-accredited certification companies in much the same way as EPCs are presently done. Unlike the present system the process will be beefed-up by the requirement for schemes to comply with EN 45011 and covered by UKAS.

The cost of assessments will be an issue. Given the government's history of failing to stick to plans, the risk associated with the cost of gaining certification may put off many smaller operators. Inevitably, a thorough assessment is a complicated process, particularly for non-domestic buildings. A different business model may be needed.

The Green Deal also needs to address economies of scale. It's unlikely that the refurbishment of an entire street of similar dwellings will be encouraged by a scheme primarily designed for single buildings.

Installation will follow a similar route to that applied by the microgeneration certification scheme. Installers will need to demonstrate to a new Green Deal oversight body that they are operating fully in accordance with a code of conduct. Included in this code is the requirement that operatives possess the appropriate levels of competence to install and commission the products used in the contract. A Publically Available Standard is under consultation (PAS 2030) which seeks to define these skills through National Occupational Standards (NOS).

As well as using appropriate labour, installers may only use products that have been approved and are listed in a new Green Deal-ready database. If the contractor for a domestic refurbishment is also responsible for organising the finance (as anticipated in the Green Deal), then they will need to register under the Consumer Credit Act.

As with assessors, there is a risk for contractors seeking Green Deal status. The market has yet to develop, and the amount of work is an unknown quantity. Also, the liability for the contract performance will lie between the owner and the contractor. It is unclear how the application of the assessment software (SBEM or RDSAP) will be implicated in a contract.

It is likely that the Green Deal will be attractive to large organisations, but the processes for subcontracting specialist installation services, in compliance with the code of conduct, needs to be developed.

The government recognises that not all interventions can be made to fit the golden rule. Some households will not recover energy savings because hard-to-heat homes will take comfort savings rather than cost savings.

Existing funding available from the energy providers under the CERT and CESP may be redefined, and renamed the Energy Company Obligation (ECO) to be applied specifically to these types of buildings. It may then be possible to access some grant funding to ECO and Green Deal financing.

The proposals are a complex change from the present system. A risk exists of a gap opening up between scheme end and implementation - a serious issue for traders working in this area.

Andrew Eastwell MPhys is Chief Executive of BSRIA.