1. Energy Saving Trust: Delivering the Green Deal
Ben Frier – Local Delivery Manager

2. What are we trying to finance?
Return on investment over 25 year period with householder as the investor investing their own money
Returns for energy efficiency
Loft ~45%
Cavity wall ~30%
Solid wall, internal; 4-9%
Solid wall, external; 0-3%
Returns for solar PV FIT
6-8% index linked
Previously proposed returns for RHI
6% solar thermal
12% other
Whole house
5-7%
25 May, 2018

3. Role of Local Authorities
Aligned Incentives
De-risking
Jobs
Fuel Poverty
CO2 reduction targets
Landfill reduction
Own estate contracts
Social housing
Marketing support
Planning
Waste contracts
Convening power
Project initiation
Procurement
Local initiatives (LEPs etc)
Community leadership
Project pipeline
Scale
Local Authority
Revenue accounts
Grants – UK and EU
Prudential borrowing
Credit enhancements
Finance provision
25 May, 2018

4. Work with private sector
LA Green Deal options
Concept
Going live
Public Sector model
Partnership with private sector (finance/ delivery)
Public Private finance model
Carbon proactive
In-house model
Marketing/ Facilitation role
Retrofit Guarantee Fund
Minimalist
The Energy Saving Trust report identified five models for delivery Green Deal based on a local authorities proactivity around the Green Deal and the interest in working with the private sector
Provide marketing support
Outsource finance and delivery
Leave to central government and the market
In house
Work with private sector

5. 1. Leave it to the Market: Market view on financing the GD
Energy suppliers and retail firms don’t want to finance the Green Deal off their balance sheets
Balance sheets committed to other programmes
High cost of capital of 8-10%
Challenge of providing for fixed rates for 25 years
Confidence needed in achieving scale in order to recover start up costs
Confidence in delivery to existing consumer base
The Green Deal is not well suited for retail banks and mortgage lenders
Long term fixed rate finance not attractive
High system start up costs
25 May, 2018

6. The Green Deal Finance Company
PWC
Banks
Energy Companies
Building firms
Refinance programme
GIB
Banks £?
Key Issues:
Finance
Will it be at scale?
Will GIB finance?
Will banks provide?
What will be the cost of capital?
Green Deal Providers
What restrictions from banks?
Access to ECO?
What obligations to local jobs?
What obligation to long term service?
Householders
What credit risk restrictions?
Measures restrictions
No solar PV or RH
Operations
Who will pay for set up?
Who will operate?
2. Fund pays GDP
3. Pays fund over upto 25 years
Green Deal Provider
1. Measures delivered to property

7. General promotion of the Green Deal market
TGDFC
Finance vehicle(s)
GDP 1
GDP 2
GDP 3
GDP 4 etc
Framework of approved GD providers which could be run by anchor authority or County for all District/ Boroughs
Local authority
broad marketing
25 May, 2018

8. General promotion of the GD market (2)
TGDFC
Finance vehicle(s)
GDP 1
GDP 2
GDP 3
GDP 4 etc
Borough 6
Borough 1
Borough 4
Borough 7
Borough 3
Borough 5
Borough 2
A variation in the model has authorities choosing a preferred Green Deal Provider for its area

9. Leave it to the market: General promoter
Strength
Weakness
Dependency
Passive approach; carries no financial risk
Limited funding needed and no procurement costs required
Need to be attractive areas in which GDPs will operate
Does not take advantage of strong LA positioning
No direct economic development opportunities or drivers for local jobs.
Ability to attract ECO
private sector providing necessary momentum with GDPs
TGDFC or energy supplier/ retail led models
Boroughs that find this model attractive will be happy to take on some risk in order to achieve some certainty around a large scale programme
25 May, 2018

10. 2. LA as a marketer Finance vehicle(s) GDP 1 GDP 2 GDP 3 GDP 4 etc
Marketing & Surveying Organisation
Marketing for a panel of GDPs
Referral fee
TGDFC
LA investment into own programme or third party vehicle
25 May, 2018

11. LA as marketer/facilitator
Strength
Weakness
Dependency
Set up of TGDFC or other finance vehicle
Strong GDP network
Straight forward framework to implement
Capital investment limited to start up costs
Can be repeated and a number of local authorities could work in concert
Low balance sheet issues
Limited scope for broader outcomes
Need to procure and agree finders fee
Potential dispute with operators over identification of customers
Potential for adverse publicity if approved providers are ineffective or if equipment does not perform
Potential for GDPs to cherry pick
25 May, 2018

12. 3. LA as large scale Green Deal provider
Anchor LA (+ partner LAs)
Delivery partner
Finance vehicle
Marketing
Delivery (via panel of installers)
TGDFC
LA/ Bank finance
Refinance once track record in place
Presentation title insert here
25 May, 2018

13. LA as Green Deal Provider
Strength
Weakness
Dependency
Long-term financial risk taken by private financiers
Delivery Partner responsible for making it work
Potential to create jobs and local low carbon sector
Smaller LAs can join
Delivery in your area
First loss risk
High set-up costs (but can be recovered)
Scale required to achieve critical mass to access capital markets.
Issue of governance
Bank fees if bank finance used
Birmingham City Council procurement process
Working with partner LAs
Boroughs that find this model attractive will be happy to take on some risk in order to achieve some certainty around a large scale programme
25 May, 2018

14. Examples Birmingham Newcastle Cabinet decision in April 2011
Initial programme of 15,000 private and social houses valued at £100m
Option to extend to 60,000 houses and £400 million
OJEU and PQQ issued in Sep 2011
22 West Midland local authorities in total on the contract
Now covers non-domestic stock
11 other public sector organisations including housing associations and police/fire
Valued at £275m with option to extend to £1.5b
Newcastle
Cabinet decision in July 2011
Recognised need to work with neighbouring authorities to achieve scale
Open up to North East councils
Reverting in January for procurement decision
Strong support from North East councils
4 committed in total
Financial and legal advisors procured
Project governance and procurement programme being established
Back to Cabinet – 25th Jan
Approval to start procurement of a delivery partner
Approve, in principle, use of LA finance
25 May, 2018

15. West Sussex multi-tier model
Districts and boroughs
WSCC
Finance
Anchor authority
Provide start up finance
Districts repay via joining fee or;
Householders repay via Green Deal payments
Run procurement programme
Districts named as partners
Manage future re-financing
Contribute housing stock
Asset-matched investment
Contract
Delivery partner
Domestic
Public sector non-domestic

16. Managing Green Deal Options
LA as Green Deal provider
LA as marketer
LA as general promoter
2011
2012
2013
2014
2015
Can start now
Clarity on private sector capability
Clarity on market delivery
Option to consolidate around working model
25 May, 2018

17. What do you want? What will you put in?
Resource/Risk/ Control
Outcomes
LA as large scale GDP
LA as marketer
General promotion
25 May, 2018

18. EST LA support – to date
Green Deal options appraisal and business case
Greater London Authority (on behalf of 33 London Boroughs)
Association of Greater Manchester Authorities (10 authorities)
Nottingham City Council
Business case for a preferred Green Deal model
Birmingham City Council
Newcastle City Council
West Sussex County Council
Capacity Building workshops
Sustainability West Midlands (33 authorities)
Building an evidence base
Green Deal and FITs measures potential, ECO subsidy, economic impacts, CO2 saved
Used by LAs and Registered providers
25 May, 2018

19. Contact Ben Frier Local Delivery Manager 07961 271587
Vicky East
Green Finance Manager