Savvy Money: Don't give the Green Deal the cold shoulder

A thermal image of a badly insulated house with energy being wasted (PA)

For the first time in a few years, we've had a proper summer, but this week the nights were decidedly chilly. Soon it will be back to the twin terrors of wrestling with thermal layers and sky-high energy bills.

Going green for less

So why aren't more of us signing up to the Government's Green Deal scheme, which is designed to help us make our homes more energy efficient? In theory, it should be a no brainer: you can get energy-efficient measures, from loft insulation to a new boiler or even double glazing, fitted without having to pay upfront. It's the ultimate "buy now, pay later" deal, because your annual payments can't be more than the savings your new energy-efficient home produces. Simple, right? Err.. not necessarily simple enough.

Low take-up

The Government recently announced just 132 people had taken up the Green Deal and only one has started paying for their energy-efficient changes through a Green Deal loan, although it says that around 50,000 have had assessments done. Getting an assessment is the first stage and you have to have one before you can find out if you'd qualify for a Green Deal loan.

There may be lots of reasons why the Green Deal has got off to a rather lukewarm start. A lack of awareness – despite more than £16m being spent on its administration and marketing – and a worry about being given the hard sell by dodgy salesmen are two that spring to mind. But these concerns don't necessarily have to be (Green) deal breakers. The Government has put safeguards in place to try and ensure that the Green Deal assessors aren't a bunch of cowboys and I'm sure awareness of the scheme will increase in the coming months.

Too complicated

The real problem is that the financial side of the Green Deal is a bit too complicated. Under the scheme, once you've had your assessment, you can pay for any energy-efficient improvements with cash, a personal loan and/or a Green Deal loan. If you go down the Green Deal route you'll be charged 7-10 per cent interest and will pay back your loan through your electricity bill. That could mean it takes a good few years to pay off.

The Green Deal is a headache for energy providers too. Their billings systems now have to cope with ring-fencing customers' Green Deal repayments and making sure they get passed onto the right finance provider at the right time. And, if a customer with a Green Deal loan switches from another company, the old energy supplier will have to work out what's been paid off and what's owing.

Cashback

Thankfully, there is a more straightforward option; a government-funded Green Deal cashback scheme (called Green Homes cashback in Scotland), and you don't have to take out a Green Deal loan to qualify for it. Under the deal you could get cashback of up to £1,000 limited to 50 per cent of the money you've spent. You'll still need a Green Deal assessment, and not all energy-efficient improvements qualify (for example, you can only get cashback on a new condensing boiler if your existing boiler is a non-condensing one). But the cashback you get is calculated on the amount you pay not the overall cost of what you buy, and there may be other subsidies for which you qualify.

Verdict

Green Deal loans are unnecessarily complex. But improving your home's energy efficiency can make financial sense, so I'd definitely look at the cashback offer if it's something you're considering.

savvywoman.co.uk