The Green Deal and Energy Company Obligation (ECO) June 2011

Overview 2 The Green Deal Energy company obligation What’s next Questions

The Green Deal 3 A new and ambitious approach to home energy efficiency… Green Deal Process Installation Repayment and Follow Up Assessment Finance

The Green Deal – Assessment Gateway to the Green Deal Accredited assessor produces – fabric and occupancy assessment Impartial – uses standardised methodology Consumers can shop around after receiving advice 4

The Green Deal – Finance Householder receives measures at no up-front cost from a ‘Green Deal provider’. Payment obligation attached to the energy meter at a property. Obligation transfers automatically to whoever pays the energy bill at the property. Not a loan, and not secured against the property. 5

The Green Deal – Installation Green Deal will require standards and accreditation for products and installers Installer will need to: –meet certain standards to be accredited –carry the Green Deal kite-mark/ logo –sign off work once complete and inform GD provider that repayments can begin 6

New Energy Company Obligation – Underpinning the Green Deal Unsuitable for finance e.g. Fuel poor or low income; Low energy user; Hard to treat housing CONSUMERS Suitable for full finance e.g. On higher incomes; High energy user; Low cost measures Green Deal Finance Energy Company Obligation MEASURES Funded primarily by GD Finance e.g. basic insulation Funded primarily by ECO e.g. central heating Twin objectives – CO 2 reductions and thermal efficiency

Background What is an energy company obligation? Government sets a outcome and obliges suppliers to deliver The outcome must be related to reducing domestic carbon emissions (or with new powers in the Bill the cost of heating) An administrator then ensures the rules are followed – changes require legislation Energy suppliers are assumed to fund their obligations through energy price rises with poorest hit hardest by higher energy costs Not a pool of money Why use the suppliers to deliver? Energy suppliers have relationship with every household Liberalised market and economies of scale keep costs down 8

Objectives of the ECO Deliver Carbon Savings - deliver a step change in rate of improvement of homes and provide certainty that we will realise long term carbon savings Support the Vulnerable – continue to support thermal improvement, particularly heating systems, for the poorest and most vulnerable after Warm Front Work alongside Green Deal – for the technologies crucial to meeting 2050 carbon objectives (for example solid wall insulation) encourage innovation and investment and drive down the costs. Ensure Green Deal works for all consumers regardless of social circumstances by providing extra support if required

ECO – key features Many details still to be determined – will be consulting But clear that it will: apply to major suppliers be ambitious focus on “hard to treat” and lower income/vulnerable have both carbon and heating objectives need to offer smooth transition from CERT/CESP, work alongside the Green Deal in many cases

ECO – key features Likely that ECO will: include very restricted list of technologies supported? be a long term obligation (10 years) with interim targets and regular reviews? require detailed reporting of measures installed and carbon savings, and financial reporting on the real costs of delivering ECO?

Green Deal finance vs. ECO ECO provides reasonable certainty of outcome. But under ECO everyone pays and only some benefit, while under Green Deal finance the costs and benefits stay together. Linkages ECO delivery should use the same standards and consumer protections as Green Deal When Green Deal finance alone cannot deliver, ECO should combine with it seamlessly behind the scenes ECO should not distort the open and competitive Green Deal market ECO and Green Deal

The Supply Chain Green Deal will remove barriers promote take up and stimulate the market for energy efficiency – leading to more activity and more jobs The supply chain could be very broad, including opportunities for a wide range of companies (energy suppliers, retailers, installers, etc) 13

The Green Deal – Indicative Timetable Autumn Bill receives Royal Assent (depending on length of 1st Session) Ahead of Autumn officials will be developing thinking on secondary legislation with a view to drafting secondary legislation and formally consulting. Early 2012 – secondary legislation laid in Parliament Spring 2012 – detailed guidance prepared Autumn 2012 – First Green Deals appear 14