The Green Deal is a new way to cut energy bills and make your home more energy efficient – at no upfront cost. Is it worth going for?
The Green Deal is a massive new government scheme which aims to help households save energy and cut their bills – but at the moment, most people haven’t got a clue what the Green Deal is about (or are even aware that it exists.)
So what is the Green Deal?
The Green Deal scheme allows households to install energy-saving measures to their home while paying hardly any upfront costs.
Install energy-saving measures to your home while paying hardly any upfront costs
Home improvements covered by the Green Deal include:
- Energy-saving heaters and boilers
- Insulation (such as loft and cavity wall insulation)
- Renewable energy technology (such as solar panels)
Whatever improvements you make to your home, you don’t pay for them right away with the Green Deal. Instead, the cost of the improvements are added to your energy bills and spread out gradually over a period of time.
Essentially the Green Deal acts as a loan. But all Green Deal loans must meet a so-called ‘Golden Rule’.
The Golden Rule: the amount you save on your bills should always be greater than the cost of the energy-saving measures you’ve installed.
In other words, you should save more money over time than you pay out.
How does the Green Deal work?
There are four stages to the Green Deal scheme.
1. Get your property assessed
The first thing you’ll need to do is get your property assessed to determine what improvements can be made to your house, and how much you could save on energy bills. You’ll need to choose an authorised Green Deal assessor.
You may have to pay for your initial assessment. It’s worth ringing a few companies for quotes: expect to pay around £100, but some companies will refund this cost if you get your home improvements carried out by them.
If you’re worried about paying for an assessment only to find out that it’s not cost-effective to install new measures in your home, the Energy Saving Trust has some useful free online tools that will give you a rough idea of what you can save before you pay for a professional assessment.
2. Choose a Green Deal provider
Once you’ve got your home assessment, you can take that assessment to any Green Deal provider to get a variety of quotes (and it’s worth shopping around). You can also discuss with them what you want done – whether you want all the measures recommended in your assessment, or just some.
You agree with your chosen Green Deal provider the measures you want installed and the price (remember you pay nothing upfront). The Green Deal provider then arranges for an installer to come in and do the work.
Once the work’s been done, you begin repayment through a charge on your electricity bill.
The home improvements made should reduce your overall bill (because you’ll be using less gas and electricity).
There are three things to keep in mind with Green Deal payments:
- First check you understand the repayment rules before you sign the contract!
- You can pay off your Green Deal early (or in one go) if you like – but you may be charged a fee if you do this (check with your Green Deal provider)
- The Green Deal arrangement stays with the property, not the owner. So if you move house, you’ll stop paying the Green Deal charges. Similarly, if you move into a property with Green Deal improvements, you’ll take on the Green Deal costs when you move in.
Can I get help with Green Deal payments?
Help is available to certain households that are:
- On benefits
- On a low income
- In an old property
Whether you qualify for help depends on a number of factors, as it is a complicated means-tested scheme. The easiest way to find out if you’re eligible for help with the costs is to call the Energy Saving Advice Service on 0300 123 1234. They’ll tell you whether you qualify or not, and how you can apply if you are.
Will the Green Deal save me money?
It should do in theory. Making energy-efficient upgrades such as insulating your loft, double-glazing your windows and draught-proofing your house will all cut down your energy bills.
Insulating your loft, double-glazing your windows and draught-proofing your house will all cut down your energy bills
Exactly how much you save will depend on how much energy you use and the future price of energy. Higher-energy users will normally save more than lower energy users.
However, some general figures are available. For example, according to the Energy Saving Trust, you can expect to save up to £175 a year by insulating your loft and £135 a year with cavity wall insulation, while installing a new energy efficient boiler can save you up to £300 a year.
Do bear in mind that the ‘Golden Rule’ (that the money you save on energy bills should outweigh the cost of paying for the Green Deal) is not a guarantee that you will save money – it is just a guideline based on energy-saving estimates.
Will the Green Deal affect the price of my house?
Only time will tell. If a home is well insulated and energy efficient, it can definitely add to the value of a house and make it more attractive.
Remember though that the Green Deal charge stays with the property, not the owner. So there is a fear that if there’s a significant Green Deal charge attached to a property, it may put off some prospective buyers.
So that’s something to consider if you’re considering moving house in the not too distant future.
Is the Green Deal worth getting?
In all honesty it’s hard to say at the moment, because the terms of the Green Deal loans aren’t known at present.
If you meet the ‘Golden Rule’ you should save money – but remember that you’ll be paying interest on your Green Deal loan. It’s not clear what the interest charges will be at present, but the government has suggested that the Green Deal companies will likely charge around 7-8% interest. Obviously, this interest will add to the overall cost of the products you install.
Green Deal cashback
To encourage people to take up the Green Deal, the government are offering up to £1,000 cashback to a limited number of households on a first-come, first-served basis. The amount of cashback given varies (for instance, installing solid wall installation nets you £650 while draught proofing only gets you £50). Details of the cashback application process haven’t been finalised – but you can register with the Energy Savings Advice Service (call 0300 123 1234) to receive updates as and when they become available.
Cashback is attractive, but make sure you look at the whole deal
Cashback is attractive but, it doesn’t mean it’s the cheapest way to fund home improvements. Remember that:
- The government have only budgeted to provide £40 million cashback – so it may go quick!
- It’s important to check the wider terms of your Green Deal arrangement. What warranties does your contract offer? Are there early repayment penalties? You need to take all these things into account – don’t get seduced by cashback alone!
Also remember that there are other ways to borrow money for home improvements, such as adding to your mortgage or paying by credit card. Until the financial facts of the Green Deal are published, we can’t say for sure whether it will be the most cost-effective way to pay for household energy-saving measures. We’ll update you as soon as more information becomes available.
When does the Green Deal start?
You can get your property assessed by a Green Deal assessor now.