(Extract from an e-mail sent by Lauren Harding, Home Moves Assistant at Ecotricity)
Ecotricity do not feel we are in a position to participate in the Green Deal given the current design and cost of the scheme. We believe our time and our customers money is better spent “turning bills into windmills” – where profits are used to build new sources of green electricity and gas.
By helping to wean Britain off imported fossil fuels and onto homemade and sustainable sources of green energy – energy will be cheaper for everyone in the long-term.
Don’t energy companies have to participate in the Green Deal?
To ensure small energy companies are able to continue to compete against the Big Six energy companies, the Government have allowed energy companies with less than 250,000 customers to opt-out of the Green Deal because it would involve a huge investment that would be an unfair burden on small independent suppliers.
Does Ecotricity not think that energy efficiency is important?
Being efficient with energy is equally as important as making green energy – they are two sides of the same coin. Ecotricity is in favour of the Green Deal scheme in principle – if it was being done in the right way.
The Government has introduced the Green Deal in a bid to encourage energy efficiency measures to be installed into people’s homes, but Ecotricity believe there are elements of the Green Deal that are not well designed or cost-effective.
What parts of the Green Deal are not cost-effective?
Firstly, a major principle of the Green Deal is the ‘Golden Rule’, whereby any energy efficiency measures that are installed should not cost more than the savings they provide on energy bills.
The problem with the ‘Golden Rule’ is that it’s based on estimates that are prone to big margins of error because of that for a lot of people the ‘Golden Rule’ won’t be upheld.
Secondly, the people providing the energy efficiency measures want interest payments and this just makes it more difficult to deliver the ‘Golden Rule’ (i.e. the energy efficiency measures should not cost more than the savings on energy bills). Worse still, those interest payments are higher than traditional forms of finance – such as bank loans.
When the Green Deal was thought up two years ago, the financing did stack-up. The interest rates available to finance the cost of insulating a house were far more (around 11%), but now you can actually get finance for around 6-8% – which could turn out to be cheaper than using the Green Deal.
What parts of the Green Deal are not well designed?
The middlemen providing the ‘Golden Rule’ estimates are often the same people that are selling the kit – such as insulation. Yet they’ve got no obligation or responsibility long term if the energy efficiency measures installed don’t work to the level promised. This is a recipe for miss-selling.
Yet it is the energy company that takes on the risk of default for Green Deal payments – not the middle-men that organise the energy efficiency measures. So Ecotricity doesn’t make money from the Green Deal yet becomes liable for the debt.
How much would the Green Deal cost Ecotricity?
For a small energy company, like Ecotricity, the administrative cost of implementing the Green Deal would be immense, with the computer systems costing hundreds of thousands of pounds (up to half a million), yet the only return on this investment would be an annual fee of £7.30 per Green Deal customer.
The Green Deal is far more costly and complex to manage than, for instance, the Feed-in-Tariff system for solar panels. Yet the annual fees to administer FiTs (which only just about covers the cost) are four times higher that of the Green Deal.
We believe our time and our customers money is better spent “turning bills into windmills” – where profits are used to build new sources of green electricity and gas.
By helping to wean Britain off imported fossil fuels and onto homemade and sustainable sources of green energy – energy will be cheaper for everyone in the long-term.
Kind Regards,
Lauren Harding
Home Moves Assistant
Telephone: 0845 555 7500
Email: home@ecotricity.co.uk
Website: www.ecotricity.co.uk
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