Energy Company Obligation (ECO) was introduced in 2013 to complement the Green Deal and as a successor to the Community Energy Savings Programme (CESP). The scheme places increased legal obligations on the UK’s large energy providers to deliver measures that improve efficiency for domestic energy users. ECO was also designed specifically with hard to treat homes and vulnerable consumer groups in mind. RPs were ideally placed to access the Carbon Emissions Reduction Obligation (CERO) element of ECO which supported installations of Solid Wall Insulation (SWI) measures.
The Government also launched the Green Deal (GD) Cashback scheme in January 2013 to help address energy consumption in UK housing stock and support uptake of Green Deal. Available to home owners, private renters and registered providers, the scheme enabled users to claim back money on their energy related home improvements. After completing a Green Deal Advice Report (GDAR) and obtaining quotes from Green Deal Providers (GDP) for the work, householders could claim over £1000 on improvements such as new boilers, insulation and windows.
The main disadvantages related to the GD Cashback scheme for RPs are restrictions on cost, time and provider choice. The user must pay to have the GDAR report carried out, which then takes time to complete. Alongside this, the choice of providers who can carry out the work is limited solely to companies that are approved by the Green Deal scheme.
However, changes to ECO which were announced in the Chancellor’s Autumn Budget Statement in December 2013, including reducing the CERO obligation and allowing cheaper cavity and loft insulation measures to count towards CERO targets, mean that RPs that were once set to receive funding for SWI schemes are now caught short as funders choose to walk away or significantly alter the offers that had once been available.
The Government has recognised the inadequacies associated with both existing schemes and has attempted to remedy them through first changes to GD Cashback and then the creation of the Green Deal Home Improvement Fund (GDHIF), which is due to go live imminently.
However, it can’t be denied that there are many similarities between GD Cashback and GDHIF. As with GD Cashback, funding is on offer to those implementing energy improvements in their properties but the options available to receive this are restricted. Through GDHIF, funding may only be accessed for SWI and/or at least two other measures in a bid to diversify the improvements being made and achieve efficiencies via multiple means, rather than through one single tactic such as installation of a new boiler or double glazing.
Incentives available through GDHIF include payments to the value of 75% of SWI installation costs (a maximum of £6000) which represents an increase of 50% on what was previously offered through the Green Deal.
For the two measure bundle, 100% of funding to the maximum value of £1000 is available for two or more approved solutions or systems including: condensing gas boiler (on mains gas); fan-assisted storage heaters; double/triple glazing and cavity wall insulation. Homeowners are then offered additional monetary incentives depending on the nature of the works undertaken and duration of residence within the property.
Regardless of the type of resident, all measures installed must be recommended on the basis of an Energy Performance Certificate (EPC) which is less than 24 months old or a GDAR report.
Effects on RPs
Despite the incentives presented through GDHIF, it too is not without its flaws. For example, as with GD Cashback, the amount of money that RPs can claim from multiple GDHIF vouchers must not exceed the threshold of EUR 200,000 (approx. £160,000) over three fiscal years due to the requirements of the EU State Aid De Minimis Regulation.
Furthermore, because GDHIF is covered by this legislation, if an RP is receiving over £160,000 in other state aid over a three year period, they may not be able to claim at all. The Feed in Tariff (FIT), Renewable Heat Incentive (RHI) and Social Housing Grant were all counted as state aid for GD Cashback and may do so again for GDHIF. Therefore, it is advisable that RPs seek legal consultation on where they stand on this particular regulation.
The ability to go direct to the Green Deal Installer without having to go through a Green Deal Provider is nevertheless an important development and frees up valuable resource across RPs. Most contractors working with RPs on this type of work will already be Publicly Available Specification (PAS) 2030 and Green Deal accredited, allowing RPs to conduct their own procurement exercises either through Official Journal of the European Union (OJEU) compliant frameworks or via their own systems.
GDHIF could be a welcome source of funding for those with no state aid concerns, no ECO (as GDHIF cannot be claimed with ECO) and with relatively small programmes of energy efficiency measures. However, given the maximum funding available, GDHIF is unlikely to kick-start SWI schemes we’ve seen stall in recent months. It is, at this stage, certainly not the solution required for effective funding of large scale energy improvement works.
RPs have come under fire for apparently utilising all funding schemes available with little regard for the long term benefits or efficiencies at stake. However, the manner in which these incentive schemes are marketed to RPs means they are understandably doing their best to secure as much funding as possible to alleviate the financial burden of combatting fuel poverty, as well as improving the health and wellbeing of their tenants.
RPs must not be underestimated as they’ve proven through asset management programmes such as Decent Homes that they’ve the capability to improve their stock in a prescribed time-frame and within budget.
Looking ahead, it’s crucial that RPs look beyond the financial incentives and implement carefully considered schemes which achieve long-term goals, benefit tenants, and reduce energy consumption.