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Will New UK Government Initiative Calm Fears Over Rising Energy Prices?

Sep 5, 2012

It is a turbulent time for the UK’s energy industry. Rising energy prices make the argument for solar PV more persuasive than ever, and the stage has been swept clear for a new financing initiative to improve the nation’s homes. It’s called the Green Deal.

The British people are not impressed by the Big Six energy companies’ pricing. 92% of people polled by The Eco Experts said they are worried about the rising cost of energy. The remaining 8% were high earners, and even they would be unable to afford energy price hikes of more than 30%. The energy companies’ 2012 price hikes have been slated in both the tabloids and the broadsheets, in a way not dissimilar to their coverage of corruption in the banking industry. Clearly an alternative is needed, and government hopes its new initiative will provide one.

So firstly what is the Green Deal? A Green Deal is a loan of up to £10,000 which you use to improve your home so it is more energy efficient. Independent assessment will identify which measures will make the most significant improvement to your energy bill. Repayments are structured as instalments over 20 years, and are attached to the property, not to the individual. So, if you move house you leave the debt behind; you also leave behind a property that — in theory — is cosier, has improved energy efficiency, and is more valuable.

So are the public impatiently waiting for their chance to sign up to the Green Deal? Of course not; 77% haven’t even heard of it. This isn’t such damning news, because the thing is still in the oven. It’s taken years to coordinate and is likely to take another year to fully ripen; although the legislation has been finalised, the marketing has to wait for the training and other particulars to be completed. It is a promising program but still a fledgling.

What makes the Green Deal different to past programs is that it will be driven by the market. Since government can’t afford to subsidise such a huge program the Green Deal has been designed to be fertile ground for business: the market will launch the Green Deal, aided only by a starter fund of £200m from the government. The plan is to improve energy efficiency and create thousands of jobs at the same time.

The objective of the Green Deal is to cut carbon emissions by 80% by 2050 to meet government targets, and to end ‘fuel poverty’, defined as when you spend more than 10% of your income on energy bills. A major research paper known as the Hills report found 20% of the UK lives in fuel poverty, with 2,700 ‘excess winter deaths’ caused by under heating each year — more than are killed on the roads.

In 2009, 7.8 million people couldn’t afford their energy bills.

By 2016, that figure is predicted to have risen to 8.5 million.

Why does energy cost so much? One fator is energy inefficiency; the UK has one of the oldest housing stocks in the world and insulation and double glazing is often not properly fitted, or not there at all. Poor heat retention wastes households money; over time energy inefficiency becomes unsustainable for anyone living on a budget.

The main factor is simply the energy companies who set the prices.

SSE (Scottish & Southern Energy) has raised prices for at least 8.4 million people by an average of 8.7%. E.on’s profits jumped by 23% in the first six months of 2012, which demonstrates their increasing margins, and British Gas owners Centrica raised prices for gas — 18% - and electricity — 16% over the same period. Investment bank Morgan Stanley forecasts that UK homes will be £200 worse off in 2013, and this is down in no small part to the energy companies.

The Green Deal will be launched in October. In time, the Government plans to develop it into the Coalition’s flagship green policy, combining environmental, social, and housing agendas. Accompanying the Green Deal will be the ECO — the Energy Company Obligation — which will replace the outgoing CERT and CESP programs for insulation and new boilers.

The Green Deal is being discussed as ambitious and innovative; Greg Barker, Minister for Energy and Climate Change, calls it a ‘new market framework’ for energy efficiency, which have previously been ‘the preserve of the Big Six energy companies’. This new framework is designed to be more flexible, cater for more people across the country, and offer more improvement measures than any such initiative has in the past.

Lead image: Go green clock via Shutterstock

The information and views expressed in this blog post are solely those of the author and not necessarily those of or the companies that advertise on this Web site and other publications. This blog was posted directly by the author and was not reviewed for accuracy, spelling or grammar.

Hello, I'm David. I write about energy efficiency and about the solar industry for websites and The Eco Experts. Skips rope and eats bread.


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