Download Item 7 Appendix

LEEDS CITY REGION GREEN DEAL SCHEME
Q & A’s
1.
What is the Green Deal?
The Green Deal is a new way of enabling any householder (landlords, tenants, owner occupiers) to access
up-front funding to carry out works to their property to improve the insulation, heating, glazing, lighting,
heating controls and install renewable sources of heat and micro-generation. The measures installed lower
fuel bills, so the initial loans (interest rate of 6.95%) are paid back through savings in householder fuel bills.
This is the ‘Golden Rule’ – no householder should be worse off financially and the charge is attached to the
electricity meter, paid through the electricity bill and remains with the house if it is sold or re-let (unless it is
paid off early). Successive occupiers therefore pay for and have the benefit of the works carried out.
2.
Why should LAs be involved in supporting Green Deal delivery?
LCR/LA involvement is very likely to result in a much better offer for all residents across the city region and
enable greater economic, social and environment outputs and jobs to be achieved. There is much
evidence where LAs are involved in schemes such as Warm Zones and Bradford Community Warmth
through co-branding, access to community groups, and using LAs networks, that take-up is higher because
of the trusted LA brand and there is better customer satisfaction and care (OfGem). Because of this, the
private sector wants LAs to be involved.
Importantly, the LCR Scheme will enable LAs to influence:
 how the Green Deal offer is delivered and at what price (eg seek standardised pricing across the LCR)
 where area programmes are targeted
 how marketing is carried out (eg. door knocking, leaflets, personalised letters etc)
 enable us to develop our own branded offer to provide an effective competition to lower prices and
improve standards by other providers.
 A long term partnership with the private sector to create a long-term sustainable insulation industry
which can invest in training for stable and skilled employment.
Again LAs experience has shown that where contracts were not put in place, delivery performance has
often been poor, targets have been missed, residents have suffered and LAs have been unable to fully
influence a turn-around in the situation. And, by association this has reflected poorly on LAs image.
3.
What are the potential LCR economic impacts of Green Deal?
The £80m LCR Scheme could create over 600 new jobs in the 3 years and support upto 24,000 direct and
supply chain jobs over twenty five years. The LCR Scheme would seek to ensure that the majority of these
jobs are created locally, particularly SMEs, and would provide a catalyst for growing the Low Carbon
Sector. The LCR scale is critical; for example, on the back of the similar Birmingham Scheme, they have
secured the UK base for a major insulation manufacturing company which is creating over 200 new
manufacturing jobs. They have also created 20 new contact centre FTE jobs dealing with Green Deal in
the first 40 days of operation and additional jobs have also been created in the supply chain including
Green Deal assessors.
4.
What about Fuel Poverty?
Fuel poverty is prevalent across the whole of the city region, ranging from around 15% of households in
York, to 22% in Craven. With ever increasing fuel bills, fuel poverty levels will also rise unless the
significant and sustained energy efficiency improvements, such as through the Green Deal, are delivered.
5.
Will people take up the Green Deal?
There is uncertainty over what take-up will be as the Green Deal is a new concept in delivering energy
efficiency and insulation measures to the domestic market – moving from a grant to a loan based regime.
However, recent ‘pay as you save’ schemes run by Gentoo and the Energy Savings Trust have been well
received and loans for home improvements such as boiler replacements at high interest rates have always
had take-up. The Green Deal demonstrator programme has also proved there is demand for loans, with
over 600 enquiries in the first 10 days in Leeds alone. Birmingham has also seen significant interest in the
first 50 days of their scheme. So there are precedents.
Energy prices are forecast to continue to rise year on year so Green Deal funded measures can be seen as
a hedge against future price rises. Some people will always be able to access low interest loans (i.e. by
extending their mortgage) but many people will not be able to access unsecured loans for insulation
measures at rates less that the Green Deal, particularly the low to middle income households. The GDFC
Chief Executive noted that c90% of households will be able to access the Green Deal loans.
LAs involvement will be critical to reassuring residents about Green Deal, which is why the private sector
wants to work with LAs. Significant technical work was undertaken last year to sieve out the least likely
properties to take up Green Deal and to assist targeting of the housing stock (c450,000 homes from a LCR
total stock of 1.2m). Several LAs are cross checking these properties with householder income and
benefits information to further ‘home-in’ on the most likely households to take up Green Deal. ‘Area wide’
approaches and the inclusion of social housing will help to maximise early take-up. The LCR Business
Case is therefore clear that the target of 12,000 homes in the first 3 years is a conservative estimate.
6.
What is ECO?
The Energy Company Obligation (ECO) replaces the former CERT and CESP funding regimes, and will be
funded by the energy companies. ECO is split into three distinct areas: Affordable Warmth ECO (AW
ECO); Carbon Saving Communities ECO (CSC ECO) and Carbon Saving ECO (CS ECO). AW ECO will
fund vulnerable private tenants and homeowners in receipt of certain benefits. CSC ECO will fund certain
insulation measures to properties of any tenure within the most deprived 15% of lower super output areas.
CCS ECO will fund properties of any tenure for a very small number of expensive energy efficiency
measures, including solid wall insulation, narrow cavity insulation and room in roof insulation, in order to
ensure the Golden Rule is met. This new ECO regime is likely to drive demand for solid wall, narrow
cavities and attic rooms insulation.
7.
Are LAs going to be competing with the private sector?
The Green Deal will be delivered by many private sector organisations. All the big six power suppliers are
likely to have a Green Deal offer as well as B & Q, building contractors, and large building companies. The
private sector will seek to maximise shareholder returns, will be contracted to deliver carbon reductions
cheaply as possible and are therefore likely to cherry pick easy properties in affluent areas. They will also
likely to provide a much more expensive offer in rural areas due to higher operating costs.
8.
What approach is proposed for the LCR Green Deal Scheme?
The proposed LCR Green Deal scheme will procure one or more Green Deal Providers to become our
delivery partners across the whole of the city region. Other authorities such as the rest of North Yorkshire
and the East Riding, as well as Registered Providers may choose to also participate. All participants need
to confirm by the time of procurement inception (May 2013), so they can be named on the OJEU Notice.
The Delivery Partner will have overall responsibility to set up and manage a programme that delivers
improvements to 12,000 homes (over 3 years), including driving householder demand through a marketing
campaign. This will include ensuring that installations are good value, bring maximum ECO contributions,
include key sub-contractors (such as social housing providers’ sub-contractors) within the contract and
create local jobs wherever possible. They will need to be a private company with a strong balance sheet in
order to offer long-term warranties on the equipment and its operation and to cover any liabilities in the
case of mis-selling. There will be legal arrangements between local authorities and the Delivery Partner(s).
Accredited installation companies (incl. SMEs) will deliver the installation programme and maintain and
repair the measures, through warranties with the Delivery Partner. The energy companies will, as a
minimum, provide ECO investment and will administer the GD payments, but may wish to become Delivery
Partners or installers. Local Authorities will put forward homes for targeting and support delivery through
the ways set out in Qu 2 above. Leeds City Council has agreed to be the Anchor Authority providing the
momentum and leadership to get the Scheme off the ground, including taking a lead on procurement.
Although the LCR Business Case proved that LAs investing prudential borrowing to support Green Deal
measures was a financially ‘sound’ model, as the GDFC has raised sufficient funds, LA prudential
borrowing is now not a pre-requisite. However, LAs may wish to still wish to invest in the Green Deal
directly to generate a ‘surplus’ (between the Green Deal % rate and the lower rate of LA borrowing) which
they could reinvest as they see fit. This is a decision for individual authorities.
9.
What are the risks and financial costs to LCR authorities?
Once we have contracted with a private sector partner, the majority of the delivery and financial risk would
lie the provider. The biggest risk is the ‘reputational risk’ to LAs of poor performance by the Delivery
Partner and their sub-contractors, but the proposed contracting route would seek to mitigate these risks.
Apart from those authorities that may wish to provide prudential borrowing, the only financial costs to
participating local authorities are the legal and procurement costs. Work is showing that costs can be
significantly reduced from original estimates based on schemes elsewhere, but a Competitive Dialogue
process for such a large scheme (c£80m) requires significant resources but would ensure that we receive
the broadest interest from potential providers and will give us the ability to negotiate the best deal for the
LCR. Discussions are ongoing with Chief Executives and Leaders to determine an acceptable sharing of
these costs on a proportionate basis between participating authorities - as the residents in all districts would
benefit from the LCR Scheme.
10.
What may happen without the LCR Green Deal Scheme?
Individual Local authorities would need to procure contracts to get ECO resulting in piecemeal work on the
housing stock. The ECO providers would also likely target housing providers with offers which might
concentrate activity and delivery in the Registered Social Landlord / public sector stock. It is likely that
without a lot supportive effort from local authorities, the private rented sector and owner occupiers would
see very low levels of take up. Also, delivery would be more ad-hoc with households being ‘cherry picked,’
and ECO funds and wider investment would also likely be diverted away from the city region, particularly to
where other LA Schemes are in place.
Therefore, without the LCR Green Deal Scheme it is considered that:
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LCR residents would receive a worse deal;
job creation, apprenticeships and training would be much more limited and piecemeal;
the economic potential of the low carbon sector would not be maximised;
less ECO would be attracted to the city region; and
 less households would have access to and would take-up Green Deal measures, which would likely
impact on efforts to reduce increasing levels of fuel poverty.