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Green Deal and Energy Company Obligation

Green Deal and Energy Company Obligation

On 23 November 2011, the Department for Energy and Climate Change (DECC) published its long awaited consultation on the Green Deal and the Energy Company Obligation (ECO).

The Green Deal seeks to unlock the sustainable retrofit market by enabling individuals and businesses to make carbon efficient improvements to their homes and premises without having to pay the upfront cost.  The measures will be funded by Green Deal "providers" and repaid by occupiers through savings made on energy bills which provides an innovative funding mechanism aimed at encouraging investment and driving growth at relatively low risk to investors and energy bill payers.

In order to protect the public, the "Golden Rule" must be applied – the cost of carbon saving improvements must not outweigh the potential savings on the energy bill.  This may not be achievable in all circumstances so the ECO will require energy companies to subsidise energy efficiency improvements in low income households and hard to insulate homes which require more extensive and/or expensive works to bring them up to standard.  The Government currently anticipates that £1.3 billion a year will be available through the ECO.

Treasury Minister, Danny Alexander, has announced that £200 million of public funds will be available to help boost early take up of the Green Deal when it is launched.  DECC apparently is still to decide how the funding will be allocated – but nothing is off the table with options including advertising campaign to cash incentives.

The consultation is available on the DECC’s website (click here to access a copy).  As well as the usual impact assessments the Government has also published draft secondary legislation, Codes of Practice, amendments to energy licensing requirements and industry agreements and a draft Green Deal arrangements agreement alongside to flesh out proposals and provide a fuller picture of current proposals.  Details of these are also available on the DECC’s website.

As part of the consultation the Government is seeking views on (amongst other issues):

  • Whether proposed requirements for Green Deal assessors are stringent and detailed enough;
  • Length of Green Deal plans (and whether they should be linked to the lifespan of the measures installed);
  • Issues around early repayment of Green Deal finance;
  • Proposals about obtaining the consent of the bill payer and the property owner (if different) to both the proposed works and cost recovery through the energy bill;
  • Who should administer the ECO scheme.

A full list of issues which the Government is seeking input on is set out on pages 35 to 42 of the consultation document.