Opinion: Green Deal Finance Company - Teething troubles should not overshadow achievement of creating a market

11th June, 2013

The Green Deal Finance Company (GDFC)  event at the QEII Centre in London last week brought together 51 of their ‘family’ of Green Deal Providers, as well as some interested observers.

For those of you new to this retrofit game, The Green Deal Finance Company was set up to allow Green Deal Providers to borrow on the international money markets at competitive rates. It is a not for profit organisation – the brainchild of PwC partner Paul Davies.

This time last year, the GDFC consisted of one member of staff – a chap called Paul Williamson on secondment from nPower. Now, based out of a City of London-HQ, the team comprises 20+.

Mark Bayley, GDFC’s chief executive, reflected upon the achievements of the organisation and the snagging issues that those Providers in the room were probably already experiencing. He seemed a very genial fellow. Certainly his background is worth taking note of. A Doctorate in the ‘pre-dissociation dynamics of small polyatomic molecules’ may be an unusual first step in to the business world, but within 14 years he had risen to the heights of Chief Executive of London and Continental Railways. Presumably his short spell as Commercial Director on the High Speed 2 thickened his skin in preparation for working on The Green Deal.

Mark pointed to the achievement of not only setting up the organisation, but also making it function. He bemoaned the ‘highs and low’ of The Green Deal, and asked his members for a level headed approach. He said that three Providers now have approved Green Deal Plans, enabling them to take their offer to market. A further 43 were being ‘on-boarded’ (a major buzz phrase if you work at GDFC), which means that they are in the process of navigating systems integration and financial compliance issues. £244m was available right now in finance. Yes, that’s right, £244m is available RIGHT NOW in finance. And what’s more, the European Investment Bank was happy to provide additional finance to see the Green Deal through its first year.

So everything is rosy in the GDFC garden then? Well, not quite. Mark acknowledged that significant ‘snagging’ issues were being experienced. These revolved around: preparation of Pre Approved Green Deal Plans; ensuring Scottish Law recognised the Green Deal, drafted under English Law; ensuring that the private rented sector could take up the Green Deal; ensuring that sufficient numbers of insurance-backed guarantees are available and, the elephant in the room, ensuring Green Deal Assessors providing introductions to Providers have a license to provide financial advice, as required by the Consumer Credit Act.

Mark cheerfully confirmed that the ‘West Lothian question has been resolved’. I sensed he paused, waiting for cheers or applause, but sadly there was none. I suspect this was due to the fact that buried away amongst his ‘snags’ are some pretty major issues. And it was these issues which formed the lion’s share of the remainder of the debate.

The issue of creating a standard template for Green Deal Plans appeared fairly minor to me at first. Apparently, GDPs had been doing their own thing – cobbling something together, and making it official-enough-looking in the hope that this would do the job. A snag, but just a snag, right? Wrong. When Gareth Wordingham, GDFC’s Head of Operations takes the stage, he advises the GDPs not to send in any further GD Plans until late June. Ah, a fairly major issue then. Let’s hope DECC have more GD Go Early assessments up their sleeve to keep the momentum going.

The good news is that the National Energy Foundation have been called in to produce these Standard Plans. Working with seven of the GD Providers, let’s hope they can put this to bed once and for all.

‘83% of all households will be eligible for Green Deal’, say the GDFC. ‘More than any other finance option’, they report. This is a result of the excellent historic credit collections on electricity bills, which has enabled the GDFC to make assurances to the money markets. But in the same breath, there are major snags if you are a renter due to that wonderful Consumer Credit Act again. If I understood it correctly, an RSL or Local Authority would be fine to take out Green Deals against its properties, because they are exempt from CCA rules. Unless the property is empty; in which case there would be legal doubt as to who was responsible for the repayments. In terms of private landlords, this seemed to work in reverse. You are fine as a landlord if the property is empty, but if it’s tenanted, you can not currently submit a GD Plan against that property. Ouch. And what’s more the fix will not be ready until the fourth quarter of 2013.

You get the impression that Mark and his team are doing a great job under pretty impossible circumstances. Mark acknowledged that mistakes had been made, and that he expected more would follow before everything falls in to place. If I was his customer, I would have admired his honesty and willingness to listen.

However, when we moved on to a Q&A session, there was change in tone. Up strode Duncan Sedgwick from the GDFC’s PR agency Westbourne Communications to chair proceedings. Difficult questions were put to the panel. ‘I’ve been advised by my lawyer that we need an Audit Letter, but I’ve had conflicting advice from GDFC and DECC’, said one Provider. ‘Sorry’, began Mr Bayley. ‘But you should put it in writing’, interrupted strident Duncan ‘and then Mark will sort it out, won’t you Mark?’. ‘Yes, you should put it in writing and then I’ll sort it out’, agreed Mark.  Another Provider asked what the GDFC would do to challenge the perception that GD loans being attached to the property would slow house sales down. ‘It’s really outside of our remit – the industry needs to challenge this through effective marketing’, said Bayley correctly. ‘But you’ll be lobbying hard at the matter, won’t you Mark?’ said strident Duncan. ‘Oh yes, we’ll certainly be lobbying hard’ Mark replied. Now there’s one PR firm you can be sure are watching your back.

So, elephants in the room duly outed, the agenda shifted to effective marketing of the Green Deal. Now, as Retrozine has written before, this is pretty important, and not to mention almost completely absent. If the enthusiasm of Petter Allison, Commercial Director of the GDFC with responsibility for demand generation, is anything to go by, we’re going to be fine. Now I declare that I’m tired of the same objections being raised about GDFC finance: interest rates too high, mortgage and high street lending cheaper; consumer won’t buy it if they feel it will prevent the house being sold one day. Petter proceeded to sell Green Deal Finance more effectively than I have heard before. He listed some compelling sales messages:

  • It is available to 83% of the population because they’ll clear our credit check threshold at a time when securing home improvement loans is difficult for many;
  • It is affordable - as a long term, fixed rate loan, GD Finance stacked up well against any other product on the market;
  • It is flexible  - it can be combined with both grant funding and topped up with personal investment, meaning deep retrofit is possible even when measures don’t meet the Golden Rule.

One hopes that the Providers present were taking notes. Ultimately it is down to these organisations to take the message out to consumers and businesses. They could do worse than follow the advice of the final speaker, John Humpish of Customermonics. Commissioned by GDFC to take an objective look at marketing to consumers, Humpish had surveyed hundreds of would-be consumers. Here are some of the key statistics:

  • 63% of people know what an EPC is
  • 27% have one – 83% agree with the need for one
  • £69 – the amount customers felt they should pay for an energy assessment
  • 90% said they would like to have a property rated A, B or C
  • £3365 – amount householders felt they would invest in retrofit measures, with a 6-7 year payback period.
  • £1000 – average amount householders were prepared to contribute themselves

I left the event more optimistic than ever about the Green Deal, but also more convinced than ever that this was all going to take longer to bed in than the political rhetoric has suggested. In point of fact, with a General Election now less than two years down the line, one wonders whether it is possible to grow the market quickly enough before the next government decides to move the goalposts. One thing is for certain, it will not be as a result of a lack of dedication at GDFC HQ. These are dedicated professionals making the very best out of a ‘tough gig’. Let’s give them a chance.

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