What’s the Big Green Deal?
Emma Littlewood 26 Febuary 2013
The Green Deal has been largely well-received by the energy industry, but as is so often the case with such schemes, the devil is in the detail. Some of the misgivings expressed so far are:
* Attaching loan repayment charges might possibly affect the portability of your contract or your renegotiating position on renewal dates – although the Green Deal advisors say that so long as your new energy provider is also registered with the Green Deal payment mechanism, switching energy providers will be straightforward. * The Green Deal loan is attached to the property, not the owner/tenant, but the detail surrounding commercial property freeholds, leaseholds and service agreements may still need ironing out to smooth out issues where properties are sold. * There are no enforceable guarantees that the estimated energy bill savings will be achieved, and therefore the Golden Rule of zero-cost to the company cannot be guaranteed (although an ‘in-use factor’ reduction is designed to minimise this risk). * Green Deal Provider NPower has warned that the scheme’s cost of borrowing is too high (at more than seven per cent), despite Green Deal Finance Company (GDFC), the organisation tasked with making finance available to all accredited Providers, claiming that the rates are competitive compared with other long-term, unsecured borrowing. On the plus side, there is no cap on the amount of finance available to companies under the Green Deal, allowing large-scale installations to be financed in this way, and the roll-out is intended to make the scheme widely accessible across the UK. As a Government-backed initiative, there are safeguards in place to ensure the quality of technology and installers qualified to display the Green Deal brand mark, and to insist that suitable warranties are provided.
Are energy-saving improvements cost-effective for businesses?
Research by the Carbon Trust shows that businesses implementing energy efficiency schemes can generate returns on investments as high as 40% and good projects can deliver paybacks in less than two years.
So if your organisation is considering energy-saving improvements to its buildings, where should you start?
If you want to get going within the next few weeks or months, we suggest you first contact the Carbon Trust about their Energy Efficiency Financing scheme (EEF) which is an established pay-as-you-save scheme for businesses which has already given loans to 4,500 organisations. This scheme runs along exactly the same lines as the Green Deal: * Energy site surveys and investment appraisals identify where energy savings can be made * Sourcing suppliers of energy efficient equipment * Flexible financing in the forms of leases, loans and hire purchase The EEF scheme provides financing for projects from £1,000 and above, subject to credit approval, with no real ceiling on the project size or financing available. When asked, the Energy Efficiency Financing partners (Siemens) preferred not to quote a typical interest rate on an average loan, since each application is ‘assessed on its own merits’ – and sometimes a whole system is being financed including pre-use, service and maintenance – but insisted their rates were always ‘highly competitive’, quoting a satisfied customer (Spark Response) who *’..chose the EEF scheme to finance our lighting project because of its competitive interest rate..’* Spark Response go on to say *’We are very pleased with the smooth process and the energy savings are now offsetting our monthly finance payments, making the investment zero cost for us’.*
Carbon Trust Technology Implementation / EEF scheme contacts
* Carbon Trust Technology Implementation Scheme: +44 (0)20 7832 4806 * Implementation EEF scheme queries: [email protected] * EEF Finance: +44 1753 434476 ; [email protected] If you have a larger organisation and want to upgrade the energy efficiency of more than one building or install large systems and equipment, it is worth contacting the Green Deal team since there is no cap on the amount of financing available to individual organisations, and if you don’t need to get the installation underway immediately, once the roll-out of the Green Deal for Businesses is properly underway it will provide huge amounts of financing for large-scale building enhancement projects. The interest rates are high (see examples for a £5,000 loan below), but the rates are lower for larger loans and your organisation is expected to make savings which at the very least cover the costs. Make sure you are happy with the terms of your finance agreement – for example, any early redemption penalties that may apply.
Green Deal contacts</ * Queries: 0300 123 1234 * List of Assessors **Your organisation may also benefit** from the Enhanced Capital Allowances (ECA) scheme which enables businesses to claim a 100% first year capital allowance on investments in certain energy saving equipment, against the taxable profits of the period of investment. To find out which plant and machinery qualifies for the ECA you can browse the latest list ECA Energy Technology List (ETL). Some items require criteria to be met (e.g. lighting) which should be checked with the manufacturer or supplier. ###ECA scheme contacts * Helpline: 0300 330 0657 * ECA queries: [email protected] * ETA scheme general tax queries: Nicholas Williams. ##One last word from us: **Green Element are able to help with a whole or part of this process.** Please do contact us. Savings can be made by renegotiating energy bills onto cheaper tariffs and/or becoming exempt from the Climate Change Levy (CCL) (0.524 p/kWh from 1st Apr 2013) by transferring to renewable electricity – we’ll be blogging more about reducing energy bills…
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