Green Deal and the Energy Company Obligation – will it work?

Mr Jan Rosenow, Oxford University, Environmental Change Institute

The current UK energy efficiency policy context is very fluid with a number of new policies due to be introduced in 2012 and 2013, including “The Green Deal” and “The Energy Company Obligation”. These mark a substantial change from the existing policy regime in a number of ways, notably the explicit aim of supporting higher cost energy efficiency technologies in housing and an attempt to engage new sources of private sector finance. However, there are concerns that the pace of change may be too fast, that policies have been insufficiently piloted and that the supply chain and the home owners will respond to the extent expected.

This paper provides a critical analysis of the proposed policy changes both in terms of the institutional changes and the implications of a new finance mechanism for energy efficiency policy, as well as the overall impact on carbon reduction. While recognising the innovative nature of the new policies put forward by Government, the paper highlights some weaknesses in the proposals. First, there is a risk that the attractiveness of the Green Deal approach is being over-estimated, as commercial rate loans may not prove attractive and the approach of attaching payments to the electricity meter is new. Second, our research suggests that Green Deal / Energy Company Obligation will only deliver carbon emissions reduction at a rate of approximately one quarter of that of the policy it replaces – the Carbon Emissions Reduction Target. Finally, the impact on the delivery of measures, particular insulation, implies a radical shift from well-known energy efficiency measures with an established supply chain towards more sophisticated and expensive technologies. This may result in not utilising the remaining potential of some efficiency measures.