With the right combination of policy and communications, the Green Deal could create jobs, boost local economies, and cut carbon.
Thirty-nine, thirty-eight… The countdown to the UK’s emission targets for 2050 has begun. By the time the final grain of sand slips through the slim neck of the glass, the UK’s homes must be pretty much zero carbon. The rate required to get there is hair-raising: we need to retrofit six homes a minute, reducing the emissions of each property by 60-100%.
High hopes are pinned on the Government’s Green Deal – a scheme to help home-owners and tenants finance the changes, without racking up personal debt. It works by attaching the loan to the property, rather than the individual, with the cost paid back through the home’s energy bill. The one ‘golden rule’ is that the efficiency savings on the bill must exceed the value of the loan in any given year.
“Potentially, it’s a huge market opportunity – there’s no question about that”, says Philip Sellwood, Chief Executive of the Energy Saving Trust.
“Done properly”, concurs Simon McWhirter of the Great British Refurb Campaign, “it will reduce carbon emissions [and] could mean more money into the local economy as people spend less on fuel bills. It could even mean a jobs boon: hundreds of thousands of new jobs, both at low levels and professionally skilled. ”
A solution to be seized with both hands, then. But will home owners and occupiers recognize it as such? Much of the legislative detail is yet to be written, and so far there’s little indication from Government as to how it will be communicated to the public. So what’s needed to get it right? First and foremost, consumers need clear indications that it’s a trustworthy scheme.
“The level of trust from the customer is pretty low”, warns Sellwood. “Our research into pay as you save pilot schemes shows that, whether [or not] Government sees it as a loan, most people will still see it as a debt that needs to be repaid. Their willingness to take on debt is small, unless they can see that this debt is against the house, not against them as individuals.”
And it’s not just a matter of money. We’re talking about changes to homes that may involve significant disruption to daily life over weeks and months – and with lasting consequences. No one takes such a decision lightly. Erica Jobson, an expert on consumer rights and expectations from Which? is concerned that, unless this issue is adequately addressed, the only take-up will be from the “converts – the people who’d have done it anyway”.
“You have to think about the consumer journey”, she says. “What guarantees are there? How can consumers be sure they’re not being taken for a ride?” So advice from a trusted source is going to be crucial. The Government is beginning to respond to this need, with proposals for a dedicated telephone advice line. But who will be handing out the advice?
Those selling the Deal to consumers will be familiar brands – the likes of Sainsburys, B&Q, British Gas or Npower. Clear government endorsement will be needed to establish them as trustworthy lenders, says Sellwood. But what’s also needed, he argues, is an independent voice in the market place, someone who can say to a consumer: ‘This technology says it will save you so many pounds, and it will’.”
The Energy Saving Trust has a clear role to play here. Soon to be recognised by the United Kingdom Accreditation Service (UKAS), it will have the power to assess and vouch for individual implementation schemes.
The cost conundrum
Once the issue of consumer confidence is sussed, there’s still the question of money. After all, people will only go for the Green Deal if it makes financial sense. And that alone won’t be enough: it also has to be an attractive proposition.
“Consumers need to be driven by the money-saving potential, not the environment”
“To get significant up-take, consumers need to be driven by the money-saving potential, not the environment”, says Jobson. “Otherwise, it’ll be a big expensive niche product.”
But whether or not changes to your home turn out to be cost-effective can be complicated. The Bristol-based low energy refurbishment pilot project ‘Refit West’, led by Forum for the Future, found that a simple ‘pay as you save’ approach doesn’t always reflect the true costs of an intervention. According to its most recent report, ‘Update from the Front Line: real homeowner retrofit journeys and barriers the Green Deal must overcome’, hidden costs can occur along the way. These could be aesthetic ones, such as replacing cornicing, or structural ones where problems are uncovered. Such costs increase the challenge for an assessor of confirming that the interventions are covered under the Green Deal’s ‘golden rule’.
Take the case of Chris Priest, owner of a Victorian semi recently refurbished with support from Refit West. Perhaps not your average consumer, the reader in sustainability and computer systems at Bristol University installed high efficiency double glazed sash windows at a cost of £15,000, despite the 44-year payback. This cost far exceeds the sums likely to be covered by the Green Deal. So why did he do it? Because a “friendly estate agent” advised him that the installation would “certainly increase” the value of the property, “possibly by almost as much as the installation”.
The Update concludes that “there is a huge amount of work to do to ensure that estate agents [and] surveyors … consider and report on the effects that the measures [recommended under the Green Deal] would have on a property’s value”.
The rate of interest on the loan is another question. Jobson is concerned that the Government will leave this question to the retailers:
“If the interest is charged back at a high commercial rate, the Green Deal may not compare well to other loan schemes. It’s not rocket science – but it’s not guaranteed.”
Green Party leader Caroline Lucas compared the interest rates of commercial loans in the UK (around 8%) with those offered by successful retrofit schemes in Germany – of just 2.65%. On this front, though, things are looking up. The UK Green Building Council has been campaigning for the Green Investment Bank to help finance the Deal, by reducing the interest rate to homeowners once it is set up. And the Government seems to be coming around to the idea.
But the big elephant in the room is the fuel poor – those who find it difficult to get credit at all. “We’re talking about 20% of all UK households”, says Sellwood. In response to this problem, the Government has announced plans to oblige energy utilities to subsidise the Green Deal, focusing on the poorest and most vulnerable householders, and the hardest to treat properties. But it’s not yet clear how far the Energy Company Obligation (ECO) will stretch, and how the Government will ensure that those who need help most get it.
Jenny Saunders, Chief Executive at National Energy Action, is concerned that ECO could end up subsidising home improvements for the wealthy, and would like to see it clearly targeted at certain income categories, with – perhaps – a maximum income level.
“That will be one way to make it more equitable”, she says. “Arguably, it’s a much better route to go down than borrowing money from loan sharks! Or going without the improvements, and putting their health at risk.”
Fine in theory, but in practice?
“I was vehemently against anything that would make our rooms any smaller”, said one Refit West homeowner: “200 year-old cottages are small and dark enough without shrinking them by three inches on each wall!”
We shouldn’t underestimate the impact that consumers’ attitudes and behaviour will have on uptake. So many factors are at play here, from personal taste, to awareness of the energy efficiency agenda, to more practical barriers – such as readiness to endure the disruption.
“We’re talking about interventions that are likely to be much more disruptive than energy saving measures that they’re already not doing”, says McWhirter. “There’s massive public apathy at the moment. Home energy efficiency isn’t high on people’s radar. It needs to be easy, affordable, attractive…”
There’s clearly a big marketing issue here. Solutions could include web-based tools to help people understand what the options are and what impact they could have. Perhaps an augmented reality app could walk you through the stages of the process, in your own home – or some interior design software could show you how the outcome would look, and feel. Campaigns like Bristol Green Doors, which opens up refurbished properties to the public, will help too.
Another way to sell it, says Sellwood, “is on the basis that your house is already a mess, you’re already spending cash”. He points out that 15-20% of households are engaged in some sort of intervention at any one time. “There are natural trigger points”, he argues. “From zero to 90, at every stage we tend to be doing something to our homes which doesn’t necessarily mean moving: there’s the first baby, the kids leaving home, building the granny annex…”
Tapping into these opportunities will mean being at the ready with great communication, and across the board – from retailers, to utilities, to independent advisers, to local and central government.
The Green Deal doesn’t actually kick in until autumn 2012. But look busy.
By. Anna Simpson
This article originally appeared in Green Futures magazine. Green Futures is the leading international magazine on environmental solutions and sustainable futures, published by Forum for the Future. Its aim is to demonstrate how a sustainable future is both practical and desirable – and can be profitable, too.