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Why the Green Deal flopped

It is a tale told by an idiot, full of sound and fury and signifying nothing

A lot of words have been printed about the Green Deal and ECO schemes. Many of them derogatory (and many of those in this very blog).

A lot of words have now been printed about the schemes in the National Audit Offices’ report on the two schemes, looking at how they performed and why they (under)performed as they did and what the Department for Energy and Climate Control might have learned from the experiment.

Journalists have a special name for reports such as this. We call them No-Shit Sherlocks.

The link is here for anyone who hasn’t yet read it all and wants to. It’s too much for me to summarise the whole thing here, however, there were some phrases in it that leaped out at me.

The Department’s design reduced the cost-effectiveness of the schemes for saving CO2. Basically, they picked the most difficult, costly option for suppliers in focussing on harder-to-treat homes. CO2 savings, as anticipated by the Department, because these measures are more complex and take longer.

The Department did not test the Green Deal finance design with consumers. It’s not as though there weren’t plenty of industry voices and organisations telling DECC that it would be difficult to persuade people to pay for measures themselves. Indeed, the Department’s own consumer survey didn’t provide a strong case for schemes like the Green Deal creating demand. But they went ahead with it anyway.

It was too complicated and too expensive – the interest rate of 7% being way ahead of hat was readily available on the high street at that point. Even where there was consumer interest, people were initially put off by the complexity of the process of arranging a loan and , in the end, only half of all loan applications ultimately resulted in one being arranged. When they made the process simpler in late 2013, the uptake of the finance increased. Funny, that.

Overall, the schemes were less cost-effective in terms of saving CO2 than previous similar schemes. CERT and CESP were certainly not perfect schemes, but they did work, up to a point. The two schemes together cost £34 per tonne of CO2 saved. Green Deal and ECO cost somewhere around £92 per tonne. And that didn’t even include suppliers’ administration costs, nor what it cost them to change their billing systems to cope with the “influx” of Green Deal loans. It also fails to account for the costs of others in the chain – installers, manufacturers, assessors. All costs which DECC didn’t bother to monitor.

The schemes have not worked together as the Department intended. The Department expected energy suppliers would stimulate consumer contributions to reduce their cost of installing expensive measures. Guess what, this didn’t happen.

Most telling, however, to my mind, is the following paragraph: Ministers were very ambitious for what the Green Deal would achieve when they introduced it as part of the 2011 Energy Act. The then Energy Minister told Parliament that it had the potential to improve 26 million homes, almost the entire housing stock. He said the Green Deal “will set a new paradigm and will certainly become the biggest home improvement scheme since the Second World War”. However, Ministerial ambitions notwithstanding, the Department did not have clear success measures for the Green Deal. It did not set any expectations for the number of homes the Green Deal would improve, or the CO2 savings it should achieve in addition to suppliers’ minimum obligations under ECO.

It’s surely Business Management 101 – if you don’t know what you want to achieve when you start, how will you know when you get there, or by how much you fail to get there?

DECC may have learned something from all this, and various department bods may well be poring over this document to ensure that their next attempt works better. Let’s hope so. I mean, we’re talking energy efficiency, reducing fuel poverty and saving the planet. This stuff matters. It really matters.

About Fiona Russell-Horne

Fiona Russell-Horne
Group Managing Editor across the BMJ portfolio.

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