Commercial Green Deal launch 'near' as DECC plays down government role

22nd July, 2013

The Green Deal Finance Company has said it will wait to begin lending to businesses for commercial Green Deals until the domestic scheme has picked up. The GDFC had indicated in February that it hoped to start providing commercial loans as early as next month. But the timetable remains unclear after a spokeswoman confirmed it was “not in a position to offer Green Deal Plans to businesses” at present, saying it was working on doing so “in the near future when the domestic market is up and running”.

Concerns have been raised by contractors after just four domestic Green Deals were signed in the first five months of the scheme. “We are committed to providing Green Deal Plan set-up and administration services to any financing vehicle that wishes to fund commercial Green Deals,” the GDFC spokeswoman continued. Speaking at a UK Green Building Council event, Department of Energy and Climate Change deputy director of Green Deal demand David Thomas played down the role of central government funding in the commercial Green Deal.
Government debt facilities make up the bulk of the GDFC’s £244m funding, currently used only for residential improvements.

The DECC provides the GDFC with £20m in junior and contingent capital, while a senior debt facility of £125m is provided by the UK Green Investment Bank. The other £69m is made up from loans from Green Deal stakeholders, such as GDFC members who include Carillion, Keepmoat and Willmott Dixon. But Mr Thomas said the commercial scheme would be less focused on central funds than its residential equivalent. He said that “unlike the domestic side”, the commercial scheme was likely to be driven by local authorities and regional bodies such as the Greater London Authority, as opposed to central government funds.

High hopes have been pinned on the commercial market to boost the government’s flagship retrofit programme, particularly as the Energy Bill means it will be a legal requirement for all privately rented properties to be rated at E or above in energy performance certificates from 2018. This could apply to as many as one in five UK properties.

A report published by the UK Green Building Council has found that up to two million extra retrofits could be driven by three key incentives. The report – Retrofit Incentives: Boosting the take-up of energy efficiency measures in domestic properties – also found that the moves would add hundreds of millions of pounds to economic output.
The proposed incentives are variable stamp duty, variable council tax and an energy efficiency feed-in tariff.
All the measures were estimated to have minimal costs to the government.

The report was drawn up by a task force including Carillion, Keepmoat, Saint-Gobain, Sweett, Willmott Dixon and WSP representatives. The news came as the Building Research Establishment made a £100m funding pot available for non-domestic green retrofit investment. The funding is open to projects worth more than £2m and provides backing for up to 100 per cent of the project cost, with returns coming from a proportion of the savings in energy bills.

Half of the funding will come from the Green Investment Bank, backed by central government. Mr Thomas also laid out the timetable for what he called “ECO 2”, referring to the next phase of the Energy Company Obligation, where energy firms are required to install energy-efficiency measures in low-income households and areas, and in properties that are harder to treat. Current ECO targets expire in March 2015. Consultation will begin on the new timetable for an extension of the programme in spring 2014, with legislation for the new programme in place by the summer.

It is expected that ECO 2 will be in place for 1 April 2015. Meeting ECO targets is estimated to amount to a £1.3bn investment annually – £950m from the ECO carbon targets and £350m from Affordable Warmth targets. A DECC spokesman said it was “beginning to work up proposals” for the continuation of ECO beyond March 2015. The government-led Green Construction Board also last week launched a review of the impact of carbon policies on the non-residential sector.

To learn more about The Green Deal Finance Company, CLICK HERE to visit their official website.

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