The Green Deal home improvement scheme is an energy efficient, financing and green improvements plan by the UK government that came into effect on 28th January 2013.
The government wanted a way to get the UK housing stock upgraded with new energy-efficient appliances, better insulation and other modifications to the home to reduce overall electricity & gas usage. Not only is this a good idea for home owners who wish to reduce their utility bill each month, it also helps the UK which presently is using more energy than it is able to generate with existing power plants. The current excess energy requirement beyond available supply is covered with energy imports from France, among others. Some are concerned with energy independence and believe the Green Deal scheme is a good idea for this reason alone.
The Basics of Green Deal
In a nutshell it is a scheme to provide a homeowner loan to pay for suggested energy-saving home improvements made by an accredited supplier, based on suggestions resulting from a home survey from a Green Deal Advisor.
A Green Deal Provider supplies the funding for the home improvements which can comprise materials, equipment and labour, coordinates will all parties involved, pays the improvement bills and arranges for gradual repayment of the loan, by the homeowner, usually through the utility bill. It is hoped that the reduction in energy use because of the home improvements made, will be enough to pay for the cost of the loan, including the 7+ percent annual interest rate.
The benefit to consumers can sometimes be skewed towards the lower income earners who lack the savings to pay for the changes privately or are unable to obtain regular home improvement finance to pay for the improvements themselves.
There is a clear process when undertaking a Green Deal and this is a cause of comfort for some who would feel lost trying to figure it all out themselves. The Green Deal is a simple scheme for home owners who want to hand off responsibility to others for energy surveying, making arrangements for a loan & with contractors and following through with the energy-efficient changes to their home.
The repayments are made directly through the energy bill, so it does not necessarily add a new extra bill. The convenience of this is attractive to those people who like simplicity.
There have been concerns raised by a number of watchdog-type consumer groups that the list of 600+ builders and other Green Deal Installers is too limited. There is the feeling that this is far too small of a group of contractors to carry out the work. With a limited number of contractors, the concern is one of lack of competition. In some cases, there may well be only one approved installer in the customer's area and the lack of competitive bidding is a concern.
The interest rate starts at 7 percent, which is quite a bit higher than equivalent home improvement loans available in the loan marketplace today. The loan period can be 10 years up to 25 years, so the cost of the higher rate of interest on the value of the loan can really compound up over such lengthy repayment periods. As such, some are concerned that the higher rate penalises consumers who do not have the choice to improve their home through other means, thus disadvantaging the poorer homeowners in the community.
The cost of the Green Deal Advice Report, which varies from £95 to £150, is also seen as a negative for homeowners who may struggle to find the money to pay for this in their already tight household budgets.
Whether the scheme makes sense for an individual homeowner will depend on a number of factors including the potential energy savings, cost of improvements, cost of alternative financing, whether better deals can be found with alternative labour, and if the owner wishes to manage things themselves. Each home owner will need to consider the pros and cons before proceeding.