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Green Deal finance company seeks Green Investment Bank funding

A Green Deal finance company, established by companies including PwC and Carillion, has applied for more than £100 million of Green Investment Bank funding.

PwC partner Paul Davies confirmed the not-for-profit Green Deal Finance Company - which has members including British Gas, Kingfisher and EDF Energy - has submitted an application to the GIB, which has an initial £3 billion of government funding to spend on infrastructure.

The move came just days after the government launched its long-awaited consultation document on the Green Deal, setting out a series of 63 questions alongside impact assessments for the scheme.

The Green Deal Finance Company is hoping the GIB can help with start-up funding as it seeks to attract finance for providers of the Green Deal, which is due to start in October 2012.

Under the deal, households take out loans to fit energy-saving technology. The loans are repaid through savings in energy bills.
Mr Davies said: “The company model is about getting interest rates down as low as we possibly can. It was that logic that prompted a number of us to try and create a model that can make finance available to all providers.

“We have 16 core members but have had expressions of interest from another 40, of whom 20 have already applied to be members. We are requesting finance from the Green Investment Bank to help with the start-up costs and act as a catalyst to bring in finance.”

Mr Davies said the more capital the GIB can invest then the greater chance of the GDFC working, adding the investment needed to be “hundreds of millions of pounds, not £50m to 100m”.

He added that studies have shown for every additional 1 percentage point of interest rate, efficiency measures would have to cut bills by 7 per cent to meet the Green Deal’s ‘golden rule’, where savings outweigh retrofit costs.

The government announced an additional £200m in finance to generate take-up of the Green Deal as part of the autumn statement on Tuesday.
In the impact assessment published with the Green Deal consultation, the Department of Energy and Climate Change said that there was potential for 4.5 million loft, 4 million cavity wall and 3.1 million solid wall installations by 2020. The government aims to retrofit 14 million homes by 2020.
National House-Building Council chief executive Imtiaz Farookhi said: “We welcome the government’s commitment of more funding to the Green Deal. Ensuring sustainable, energy-efficient Housing is critical; equally it is important that consumers are afforded the same kind of protection under the Green Deal
as they currently receive with new homes.”

Interserve project director Timothy Sheehan said the launch of the consultation document was welcome as the outcry over cuts in Feed-in Tariff rates showed the importance attached to green building in the UK.

He added: “It will now be important for the sector as a whole to make sure that the Green Deal does not suffer from a low take-up rate, as shown by some early pilot projects. If this can be addressed early on, the rate of change the scheme can deliver will be positive.

“Interserve has already been working with local authority and central government organisations to deliver energy performance-related projects. It will be essential to develop these partnerships to support and drive the momentum to deliver the Green Deal initiative.”

The estimated impact of energy and climate change policies released by the Department of Energy and Climate Change shows that energy bills are likely to go down by £94, or 7 per cent, on average by 2020 due to measures such as the Green Deal and introduction of smart meters, taking account of cost rises in areas such as Green Deal repayments and electricity market reform costs.

But Land Securities corporate finance director William Cooper said the Green Deal was less appropriate for the non-domestic sector due to questions over payback periods for commercial buildings and who should bear the costs between developer and tenants.

And a £150 cashback offer for homeowners was unlikely to offer a real incentive for take-up, said Liz Lainé, policy manager of statutory campaign group Consumer Focus.

“Homeowners will spot that they will end up paying interest on the sum over 25 years if it comes out of the Green Deal charge,” she said.

 

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