Solar and the Green Deal

This article first appeared in Solar Business Focus UK. To read more articles on UK solar market developments subscribe today!

October this year heralds the start of a possible game-changing Government initiative called the Green Deal. The Green Deal will open up the residential improvements market as never before by removing the need for householders to fund the cost of energy efficiency up front through the use of an innovative type of loan secured against the energy meter of a property, rather than the householders themselves, and is based on a principle known as the ‘Golden Rule’ that ensures the cost of financing the installed measures is less than the energy saved by their installation. This article will focus on why Government has developed this scheme and how will it will realistically affect the solar installation industry.

Like much of the legislation coming out of the UK parliament, the origin of the Green Deal comes from Europe and you need to go back over a decade to the first Energy Performance of Buildings Directive (EPBD) in December 2002 to see where this initiative originally kicked off. The EPBD was the first attempt at an EU-wide level to attempt to raise the consciousness of the need for energy efficiency in buildings through the requirements for mandatory energy performance certificates (EPCs).

Unfortunately, the introduction of EPCs did not achieve the leap in the installation of improvements that the European Parliament had hoped, mainly because the requirement for a standardised approach to their production and patchy implementation at a member state level watered down the requirements to such an extent that, certainly in the UK, EPCs became a discredited requirement.

In response to this poor take up, the European Parliament had a second attempt, and the EPBD recast was the result in 2010. This won’t be fully implemented until early next year, but has strengthened the EPC requirements by making them more property specific, with better recommendations for improvements and requiring EPCs to be at the front of any purchasing or letting marketing. You should progressively see the results of this over the next year. A further twist to the directive was the requirement for member state governments to introduce financing mechanisms for consumers to access improvements and hence, the Green Deal was born.

At the same time the EU has also come to recognise that we are vulnerable to the energy suppliers, whether they are in the Middle East or Russia. This less of a problem to the UK, as we still have North Sea oil and gas, however these are of course the source of CO2 and the problems of climate change are also firmly on the EU agenda.

2050 carbon targets

The European Commission published a roadmap to a low carbon Europe in early 2011, which is where the requirement to reduce CO2 by 80 percent by 2050, now enshrined in the UK’s Climate Change Act, was first set out. As buildings account for a large percentage of CO2 emissions, up to 47 percent for some countries through space and water heating requirements, the Commission determined that the EU should aim for nearly zero carbon emissions for all its 160 million existing properties.

Of course, with the current near record low levels of new building in the UK, it is the existing properties that are the key to meeting the targets. The UK has around 26 million properties and up to 80 percent of the current stock will still exist in 2050 considering the current levels of building. A quick calculation shows that an existing property would need to be upgraded every 50 seconds in order to reach the levels required, so the pressure can only increase as the years roll by.

The UK Government, whilst committing to the headline 80 percent reduction also put in place challenging interim targets of 34 percent by 2020 and 50 percent by 2025, ahead of the EU’s own targets. This is even more challenging because the EU sees properties as an easier target than the next largest emitter, transport, so the target for property is nearer 90 percent reduction.

So how is this going to be achieved?

This is where solar technology comes into its own. The first thrust of the Green Deal will be concentrating on improving the insulation in properties, so don’t expect a big surge in orders as the Green Deal kicks off. The UK has around 6 million solid wall properties, which are considered ‘hard to treat’ so this is where the emphasis will lie at the start, but getting to the 80 or 90 percent reduction required by law will require a lot more than insulation, as this will only improve efficiency so far. In order to get to the nearly zero levels of efficiency, renewables will be required for most existing properties.

As a surveyor working for the RICS, one of my roles has been to look at the scenarios to meet the Climate Change Act requirements for property and from my research at a European level, it is clear that solar – whether solar PV or solar thermal – is the best solution to improve the energy efficiency at an individual property level. Whilst there are a number of other renewables solutions, many of them are either unfeasible or uneconomic when considered for a property.

The gatekeepers to the Green Deal are the advisors or assessors who make the home visits at the start of the Green Deal process to look at the property, the energy bills and also the behaviours of the occupiers. This isn’t as sinister as it might sound. One of the key concerns Government has is that the Golden Rule is not met leading to large numbers of disgruntled home occupiers paying more for their energy bills, so the behaviour checks are to not only advise people how to improve their energy efficiency through the way the run their home, but to also check that they are not low energy users, who will need to be warned that their energy savings might not meet the financing.

The advisors will carry out an EPC to check the rating of the existing house and also look at the suitability of the property for the various measures available because not all will be either suitable or meet the Golden Rule. Government has built in a number of safety factors into the calculations of the recommended measures, which discount the possible savings made to ensure the measures installed do provide sufficient savings to cover the financing.

Whether solar measures will meet the Golden Rule will of course depends to a certain extent on the feed-in tariffs available, the relative cost of the panels and how these factor into the overall calculation. I suspect that at the early stages of the Green Deal, solar will be recommended but not as part of the Green Deal, as the emphasis will be on insulation. However, clients who want to future-proof their property will want to be able to consider installing all the possible measures. As time marches on and the pressure increases to meet the legislative targets, solar will no doubt feature much more strongly and Government will probably have to be more flexible in their approach to financing improvements.

Conclusion

The solar industry now needs to look at ways of providing information to advisors so that they are fully up to date with the legislation, such as FiTs, innovation and improvements in panels and suitable financial packages in order that advisors can provide the best advice to clients.

Martin will be delving further into the Green Deal at this year’s Solar Power UK. Book your tickets here.