The CBI has claimed it is “far from certain” that private sector finance will be readily available to support government plans for green deal retrofitting.
In the report, The real deal? Making the Green Deal work, the CBI called on the government to provide greater clarity on the deal to ensure investor confidence in the scheme which is expected to be worth hundreds of millions to the construction industry.
It also said the government should consider as a “last resort” providing a small injection of capital into the green deal programme to build confidence in the scheme for investors.
The CBI called for the potential for defaults on repayments to be clarified, stating that a default rate of up to 3 per cent is likely under the scheme whereby homeowners will be given loans to carry out energy efficiency measures to be paid back by energy savings.
The report states: “Default is likely to be greater for non-domestic properties due to factors such as liquidation and an increased likelihood of periods of vacancy. To help overcome this increased risk, green deal repayments are expected to be shorter for commercial buildings.
“No party should bear a disproportionate share of the financial risks involved. For example, treating green deal repayments as a debt on companies’ balance sheets should be avoided, particularly as the knock-on effects could adversely affect the significant investment required in low-carbon energy infrastructure.”
Among the measures called for by the CBI are:
- A financial model that is attractive to private investors with a decision by Spring on where the default risk will lie, ensuring that it does not undermine the ability of smaller firms to become providers.
- DECC should also provide robust and realistic modelling to show expected payback periods, including for different types of properties.
- A range of policies to encourage take-up of the green deal by the public, which could include rolling out Display Energy Certificates to commercial properties.
- Promoting the green deal through targeted communications at appropriate trigger points. For example, when people are buying their first home or installing a new boiler.
- Establishing a strong, recognisable green deal kitemark and system of accreditation to generate confidence and trust, both among potential consumers and providers.