The Climate Change Act 2008 legislated for a reduction in our carbon emissions and set legally binding carbon budgets across all sectors of the UK economy – including our homes, communities and workplaces and as part of this the government has made a pledge to reduce carbon emissions by 34% (of 1990 levels) by 2020 and 80% by 2050. UK domestic buildings are among the least efficient in the world and account for 38 per cent of the UK’s total greenhouse gas emissions. The Green Deal scheme has been set up by the government to make improvements in the efficiency of these buildings more accessible to the general population and aims to do the following:

• Reduce the demand for energy
• Reduce dependence on imported fuel
• Meet carbon reduction targets
• Achieving affordable warmth
• Avoiding upfront cost

Applied to the process of improvement is the “Golden Rule” – which ensures that repayments for the work completed to improve energy efficiency do not exceed the savings made by these improvements. So in effect, this is a medium to long term solution in terms of financial savings but has an immediate effect in terms of carbon reduction.

Notable Considerations

• At present the Green Deal is mainly focussed on domestic buildings and there are only hints and suggestions of a Commercial Green Deal so there is still a long way to go before this becomes a reality for businesses – especially considering that there are currently less than 10 registered Commercial Green Deal assessors in the entire UK. Also, this only tackles around a third of the UK’s greenhouse gas emissions and it seems obvious to state that more should be done tackling those who are responsible for the majority of emissions first.
• The Green Deal does NOT cover all of the upfront costs for every energy efficient measure it recommends – thus the “Golden Rule” is not cast in stone and there are costs that on face value, are not apparent.
• Interest rate is 5-7% so better suited to those who may have trouble obtaining credit – not necessarily good value if you are able to pay for the measures in one go or able to obtain credit at a cheaper rate and anyone wishing to take advantage of the Green Deal loan HAS to go through a Green Deal Provider and Installer – these installers are not necessarily the best value / cheapest option.
• If the property occupier moves out the new owner/tenant will still have to pay for the Green Deal loans associated with the property

Commercial Potential

There are some significant incentives to a Commercial Green Deal but there are some issues to be ironed out:

• A greater technical knowledge is required for evaluating business premises as information has to be gathered on a much wider complexity of heating, cooling and lighting systems during any assessment. This will make assessors more costly to train and the assessments themselves will take a long time to carry out, therefore incurring a  greater cost to business owners.
• There is uncertainty about what finance terms will be made available to companies who go down the Commercial Green Deal route but many businesses that cannot currently get access to loans would still be able to implement energy efficient measures which will save them money in the future
• The owner of a business premises are potentially better placed to understand and take advantage of the Green Deal (compared to domestic users) because they have an increased understanding of the business model and can build this into their balance sheets.
• Aside from helping to reduce carbon emissions and helping businesses cut their energy costs in the longer term, this will also reduce the demand on the current antiquated energy infrastructure.

Torse will keep you updated of Commercial Green Deal progress in the coming months but for the moment it seems that the commercial side is overlooked in favour of the domestic which, in itself, is not without teething problems.