The Green Deal is a government backed initiative to promote energy efficiency measures for poorly insulated buildings, the intention being to reduce the energy it takes to heat and light them.
The incentive behind the scheme is there are no upfront costs, instead, finance in the form of a loan will pay for the improvements with each finance payment being made via a small tariff on the existing electricity bill. The theory is an energy efficient building will use less energy, by using less energy the electricity bill should not rise meaning the improvement measure(s) pays for itself.
Crucially for an improvement of this nature to be viable it must meet what is known as the Green Deal Golden Rule… All physical cost to the consumer for the installation must be equal to or less than the estimated savings.
Early indications to meet this rule suggest a monetary ratio of £1 in energy saving to every £11 of investment.
For example, if your energy saving measure costs £500 the estimated saving from that measure must be £45.
At present the proposal is for loans to be made available up to a value of £10,000 over a determined period of up to 25 years. With the finance being placed on the building not the individual, a longer repayment term could mean any future occupier of the property or building continuing to pay the loan.
The Energy Company Obligation (ECO) will provide subsidized energy saving measures for those individuals most in need and for buildings that are more difficult to upgrade. The hope is to provide financial support to the tune of £1.3bn/year, which government hope will assist approx. 230,000 low income households each year.