High Street Pulls Further Back from Green Deal

25th June, 2013

Major food retailers including Tesco and Marks & Spencer have put Green Deal and retrofit schemes under review after the collapse of a major supplier.

Retrofit schemes run by Tesco, M&S, a major landlords’ association and local authorities have been put on hold as the government’s flagship Green Deal continues to stutter.

Retail giant Tesco said it was “looking at our options” with regard to the Green Deal market after ‘pioneer’ Enact Energy, which provided Tesco customers with Green Deal assessments, services and products such as boilers and insulation eligible for Green Deal finance, went into administration this month.

M&S, for whom Enact provided solar PV and home insulation, also said it had put its scheme on hold and was considering its options.

A spokesman for the firm said despite taking part in initial Green Deal discussions “we didn’t think it was right for our business, our customers or the company”, although he did not rule out joining in future if the situation changed.

Sainsbury’s head of sustainability, energy and engineering Paul Crewe said it was “still exploring the potential of the Green Deal”, while John Lewis also remains uncommitted.

Major retailer involvement had been seen as a cornerstone of Green Deal credibility to entice homeowner support.

Their hesitation to provide home improvement services could come as a major blow to the government, which urgently needs to reduce carbon emissions from the UK’s existing housing stock.

The Residential Landlords Association, which offered its members a £100m Green Deal service through Enact, said it would be looking for an alternative supplier, but would also be considering finding alternative sources of funding for energy efficiency measures.

North Devon Council, another of Enact’s major clients, said all activity on its Heat Project – aimed at driving Green Deal uptake across four council areas – had been “suspended” as a result of the administration.
Head of environmental health and housing services Jeremy Mann said the council was in regular communication with the administrators, and hoped to get the project “back on track as soon as it is possible to do so”.
Enact – one of the first Green Deal providers approved by the Department of Energy and Climate Change - entered administration with 29 redundancies, with its decline blamed on the transition between renewable energy schemes and market conditions.

Joint administrator Christopher Norman from Begbies Traynor said the firm hoped to be able to accept an offer “for some or all of the business” by early next week, though he would not say whether potential buyers were interested in retaining the Green Deal contracts.

A report by a panel of industry experts has warned of a “cascade of bankruptcies amongst the smaller firms” if the responsibilities of companies and accreditation bodies are not more clearly marked out.
The report warns that confused responsibilities raise the risk of disputes over defects and sub-par work, while wafer-thin margins mean such disagreements pose a serious financial risk to SME builders, even if work picks up.

Other areas where industry advice was said to have been ignored include inadequate software, a convoluted relationship between supplier and customer, and a lack of safeguards against poor training and certification.
This, the authors warn, would lead to a “high probability of mis-assessment, mis-selling, misunderstandings and mistrust between consumers and the Green Deal scheme and its providers”, as well as propagating insufficient standards.

Most criticisms of the scheme have focused around a lack of demand and high costs, rather than the mechanics of the scheme.

The report’s authors – including consultants, energy professionals and academics – warn that “a significant amount of key technical advice” had been ignored, and that they had “serious doubts” as to whether the scheme was fit for purpose.

They also warn that, though the framework had “real potential” to stimulate the construction industry, it was unlikely to deliver on headline promises in its current form.

“The Green Deal bears little relationship to current building industry practice, wastes resources and invites fragmentation and potential conflict, while at the same time burdening the user with significant debt”, the report says.
“Major players have inserted themselves between client and contractor, adding overheads and bringing commercial construction culture to the domestic market.”

The report was sent to 21 leading politicians, including construction minister Michael Fallon, business secretary Vince Cable, shadow chancellor Ed Balls, deputy prime minister Nick Clegg and Green Deal minister Greg Barker.

A DECC spokesperson said in response to the report:
“The Green Deal has been developed over a period of more than two years, following significant consultation with a range of stakeholders and the direct involvement of industry-led working groups regarding all aspects of the scheme design.

“In developing the Green Deal standards and accreditation framework, in partnership with stakeholders and industry, we have built on existing standards and best practice. We have ensured that the criteria are rigorous but achievable, and represent the correct balance between cost to industry and consumer protection.”

The Green Deal, the government’s flagship carbon reduction policy that aims to overhaul 14m inefficient homes in the country, was due to launch in October 2012, but loans only became available on 28 January.
It was designed, along with the Energy Company Obligation that provides incentives for energy firms to upgrade homes, to replace energy-efficiency schemes, the Carbon Emission Reduction Target (CERT) and Community Energy Saving Programme (CESP), which expired in 2012.

The private Green Deal retrofit market was said by the DECC in 2010 to be worth a projected £7bn each year, but in a recent speech to the Confederation of British Industry energy minister Greg Barker said it was worth only £1bn annually.

That decrease has caused contractors, some of whom had invested six-figure sums in certification, to downgrade their forecasts. The Insulation Industry Forum said that more than 4,000 jobs had been lost by 21 January this year.
Meanwhile the surge of work as energy companies raced to meet their obligations under CERT and CESP having dried up for installers.
While larger companies were better placed to cope with the lag in work, smaller companies have seen lay-offs and, in the case of Enact, administrations.

Specialist engineering consultancy Encraft’s managing director Matthew Rhodes said the principles of the Green Deal were sound, but there was a “massive gap between the rhetoric and the expectations and the reality”.

“You’re just creating market expectations you cannot meet,” he said. “There will be lots of disappointment. It’s embarrassing for large companies, but if you’re a small company you’ve lost your business.”
He added, however, that the scheme had “pump-primed” the market by highlighting to people the alternative mechanisms they can go through.

Knauf Insulation managing director of northern John Sinfield said unless measures to boost demand through stamp duty or council tax incentives were implemented, the Green Deal would remain a “niche programme”.
“I’ve had to explain to my chief executive why I’ve had to fundamentally change the forecast for those systems,” he said.

“That’s the bit I think DECC just completely don’t get – my business is multinational, I have to fight for investment. Lots of people have invested lots of money and you’re expected to show a return on that.”

However, Siobonne Brewster, director of the Green Deal and ECO at Carillion,  said despite a “larger transitional gap than we had expected” impacting the market, particularly in the solid and cavity wall insulation sectors, Carillion had seen a “positive lift”.

She said: “Obviously we would be honest and say it’s not an easy construct – the market has been delayed to some degree, we’d like to have been off and starting faster and quicker – but given the number of policy and finance and legal elements to put in place, growing the market takes some time.”

A DECC spokesperson said: “We are aware that Enact Energy has gone into voluntary administration. We are seeking to establish the precise reasons for this. We know this will be disappointing news for employees of this company, although the administrators have informed us they are hoping to sell the company.

“The company offered a wide range of products and services, not just Green Deal. We understand that Enact Energy had not finalised any Green Deal plans.”

Early Indications
The first Green Deal installation figures are due to be released next week.
About 19,000 assessments having been carried out as of the end of May, however, industry sources said this was “no indication at all” of actual installations carried out, which they expect to be between 200 and 300, with the vast majority for single measures, and the bulk of these for boilers.
In March, energy secretary Edward Davey said he expected the Green Deal and ECO to result in a million separate home improvements by 2015.
Assessments have been available for free, with £125m of early adopter funding to drive uptake. While some assessments have lead householders to take up non-Green Deal efficiency measures, assessments are likely to decrease dramatically once incentivisation funding dries up.

This article first appeared in Construction News

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