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Overview of Green Deal finance

Posted on: 2012-07-22 16:21:51

Green Deal finance is low cost financing provided to customers to ensure take up of the Green Deal for a maximum number of measures which meet the ‘Golden Rule’.

There will be a diverse and well contested Green Deal Provider market which will benefit the consumer by lowering costs, providing scale and national coverage; the provider market will look for off-balance sheet financing, and the ability to access finance from the capital markets.  The Green Deal encourages energy efficiency by overcoming financing barriers. 

 The highlights for investors will be a strong Cash Flow which will be collected via electricity bills.  The limitations created by the Golden Rule mean no increase in risk of customer defaulting.  A pari- passu will be implemented so customers cannot part-pay their electricity bills and a disclosure system means that new bill payers will be aware of a Green Deal before moving into a property and the need to pay.  If early repayment occurs, financiers will be compensated; and Green Deal payments will be protected if an energy supplier becomes insolvent.

Will there be a demand?

We are all aware of increasing energy prices changes – and we have a motivation to save energy.  The Energy Company Obligation must be met by the Big ‘6’ and will drive many Green Deals.

The Private rented sector (PRS) regulations will ensure 680,000 properties – the most energy inefficient – the need to have energy efficiency improvements – and Green Deal is likely to be the solution.

Accreditation and Regulation

Green Deal assessments will ensure that properties get appropriate measures installed under the Green Deal.  Green Deal products will be quality assured and consumer protection will address mis-selling, with introduction of ‘cooling off periods’ and statements.

The Green Deal Finance Company (TGDFC)

This is a consortium led by PricewaterhouseCoopers (PwC) involving energy companies, installers, potential providers and being adviser by four major UK banks.  It is aiming to be a not-for-profit aggregator of finance providing access to finance to a wide customer base and contesting the provision of finance amongst interested financiers.  The TGDFC will seek initial investment from the Green Investment Bank to overcome market uncertainty in the first few years.

Role of the Green Investment Bank (GIB)

The GIB will formally launch in late 2012/early 2013 in Edinburgh when banking licence and state aid clearance for the institution is approved. In the meantime, UK Green Investments (based in BIS) will invest £775m from April 2012.

The Green Deal is one of the priority sectors for investment by GIB, investment criteria and objectives will ensure that the Bank makes a return on investment so that it can recycle its funds into other green projects. Investments will also need to be state-aid compliant.

Other developments

A number of Local Authorities are looking to be actively involved in the Green Deal. Birmingham City Council is currently procuring a Green Deal Provider. Others are looking to work in partnership with Green Deal Providers or sell leads to Providers.

For information on how to become a Green Deal Provider, please contact Phyllis Boardman on: