Green Deal: UK on the brink of adopting its most ambitious energy efficiency legislation to date

The British House of Commons is currently considering the Energy Bill proposed by the coalition government’s Programme for Government, a joint initiative of the Conservative Party and the Liberal Democrats. According to the explanatory notes submitted by the Department of Energy and Climate Change (DECC) at the bill’s first reading in the House of Lords on March 16th of this year, the energy bill focuses primarily on the energy efficiency of homes and businesses, notably through a key measure known as the “Green Deal.”

The most ambitious measure ever taken towards greater energy efficiency?

Chris Huhne, British Secretary of State for Energy and Climate Change, has swiftly dubbed the Green Deal a major revolution. And for good reason – the plan’s purpose is to improve the energy performance of Britain’s 25 million households over 20 years, creating about 180,000 jobs, says Huhne.

At the heart of the Green Deal is a fiscal mechanism that would enable private firms to offer energy efficiency improvements to homes and commercial properties at no upfront cost to consumers.

The reimbursement for these energy efficiency renovations would be paid by the primary occupant of the building – the main bill payer, whether tenant or owner – through installments on the energy bill. The DECC describes this market mechanism as “win-win,” in which the British government plays only a minor role, establishing a legal framework for transactions that would take place between private agents.

The principles guiding the Green Deal

A certain number of basic principles govern the Green Deal, including a Golden Rule: the savings generated by a green deal must be greater than or equal to the cost of the investment, over a period not exceeding the life of the measures undertaken.

Subsequently, the procurement of a green deal will not be able to take place without the express consent of all parties having an interest in the property. With the responsibility of reimbursing the investment falling to the location’s occupant and the borrowed capital being attached to the property itself, both tenants and owners must mutually agree to enter into a green deal.

Furthermore, accredited advisors will be charged with assessing the buildings to determine the investments to make within the Green Deal framework. The DECC will define the criteria to which the advisors will refer after the law’s adoption. These criteria will be adopted through secondary legislation in fall 2011.

According to a press release from Greg Barker, British Minister of Climate Change, these precise demands will also influence installers of Green Deal home improvements. Barker echoes concerns related to the protection of consumers, like those raised in the recent parliamentary debates in the House of Commons.

What measures would be financed by the Green Deal?

The measures eligible for funding under the Green Deal will also be defined by way of secondary regulation in fall 2011. Nevertheless, the DECC published a non-exhaustive list of concerned measures on June 2, 2011, which implied that the Green Deal will finance not only measures reducing energy demand (insulation, window glazing, etc.) but also microgeneration measures, such as solar panels and heat pumps.

The energy bill containing the Green Deal is currently in the committee stage in the House of Commons, where British Members of Parliament are debating amendments to the coalition government’s original text. Even if the legislative process has not yet forecast an exact date for the text’s adoption, the DECC has already begun to consult stakeholders in preparation of drafting the Green Deal’s details, before starting the official public consultation in fall 2011. A promising and complex market tool, the Green Deal should see the light of day in fall 2012 and could very well provide inspiration to the rest of Europe and throughout the world.

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