The chief executive of the Green Deal Finance Company has pointed to Government changes to the Energy Company Obligation (ECO) as a key reason for the failure of the home energy efficiency scheme.
Answering questions from the Energy and Climate Change (ECC) Committee, Mark Bayley claimed initial projections for the take-up of Green Deal Finance were heavily reliant on energy companies, who were expected to use the Green Deal to mitigate the costs of installing energy efficiency measures under ECO. In fact, 60% of demand under the scheme was expected to come from energy providers for this reason.
However, Bayley said that as a result of the government reducing the obligations of ECO in 2013, “a large source of expected demand wasn’t there” which created a substantial challenge in meeting expectations.
He added that due to the role energy providers were intended to play within the Green Deal as part of their activities under the ECO scheme, they were also expected to promote the scheme. When this involvement fell following the government’s reductions to ECO, Bayley claimed: “There was less economic incentive of energy suppliers to go out and increase demand.”
He went on to claim the structure of ECO promoted a model of activity among energy suppliers that was at odds with the Green Deal. He said: “Faced with an obligation, companies will act to close out the obligation as quickly as possible. The pace of closing out the obligation meant they weren’t going to spend time reducing the cost [through Green Deal Finance].”
Both the Green Deal and ECO were launched in 2013 in an effort to boost the take-up of home energy efficiency measures among consumers. ECO was intended to help those who were most vulnerable and unable to access finance to improve their homes, while the Green Deal applied to those who could qualify for other parts of ECO. It was hoped the scheme would bridge the gap between what ECO offered and the cost of installation. It did this through the use of the ‘Golden Rule’, which states that the energy savings a property makes must be equal to or more than the cost of implementing the changes in the first place. This was criticised throughout the course of the scheme as being too limited as a finance option, which was picked up by Bayley in his session with the ECC Committee.
“I think what could be done differently next time is to reform and liberalise the Green Deal framework so it can be accessed by a number of consumers [to suit their circumstances],” he said.
Bayley added that marketing of the Green Deal was also at fault, but that it was not the concern of the Green Deal Finance Company, which served a “back office function”. He added: “Our job was to set up, finance and administer Green Deal Finance. We didn’t have a consumer facing mandate.
“Our job was not to sit there and say ‘oh dear demand isn’t very good’.”
He also credited the use of small and medium sized firms as a barrier to any wide success of the Green Deal, who “the reach or breadth across the country to deliver to scale.”
Despite the failure of the Green Deal and its subsequent abandonment by the government, Bayley was confident that the Green Deal Finance Company would find private investment to continue its activities.
