Our handy guide will help you decide whether the government's energy-saving initiative is right for your household
After years of planning and talking, the Green Deal, the government's flagship energy-saving scheme, is now up and running.
The aim of the programme is to make our homes warmer and cheaper to run, without people having to shell out large sums of money upfront.
How does it work?
It's a scheme that allows people to pay for home improvements over time, through their electricity bill. The aim is that the cost of the work will be covered by the savings you'll make as a result of having the measures installed ? though this is not guaranteed. And there is government cashback on offer.
What sort of home improvements?
Energy-saving ones. Around 45 different improvements are currently eligible for the Green Deal ? they include double and triple glazing, a new boiler, cavity wall insulation, solid wall insulation, floor insulation, draught-proofing, a new front door, new or replacement storage heaters, and loft and hot water tank insulation. Wind turbines and solar panels could also be eligible, suggests the Department of Energy & Climate Change (DECC).
Sounds intriguing ? do I have to hand over any money upfront?
Maybe, maybe not. The government previously said householders would be able to have the work done "at no upfront cost". However, you have to have an assessment done first, and these will typically cost �75-�120. British Gas is charging �99, for example. However, the cost may well be waived if you use that company to do the work. We found one firm, Mark Group, which said it would offer assessments free of charge, and there will probably be others.
Aside from the assessment, you shouldn't have to cough up any cash upfront. For the Green Deal to work for a household, the estimated savings on their bills must always be more than the cost of the work done. To put it another way, the annual repayments must be less than the amount they will save per year through lower energy costs.
How do I pay for the work through my electricity bill?
You take your assessment to a Green Deal provider (there are at least 24 ready now ? go to greendealorb.co.uk/providers) and they will give you a quote. If you are happy, you'll sign a contract.
A Green Deal plan is a new type of unsecured loan, with interest charged on top, that is attached to the electricity bill. They last for a minimum of 10 years and a maximum of 25. Once you've signed on the dotted line, the repayments are fixed and will be collected by your utility company via your electricity bills and passed on to your Green Deal provider.
You didn't mention interest. How does that work, and what's the rate?
Yes, the fact that there's interest to pay (it is rolled into the repayments) could be the deal-breaker for many people. The Green Deal Finance Company ? a not-for-profit company set up by the government to provide financing to households via the providers ? has set its interest rate at 6.96%, but what you pay will depend on the rate charged by the provider. These will vary and are likely to be in the region of between 6% and 9%.
While the government says the total cost of the parts, labour and finance should always be less than the total savings you'll make, the fact that interest is charged on the loan at perhaps 7% or 8%, and is included in the repayments, suggests this is going to be hard to achieve.
There are other charges, too. Each Green Deal plan will have a set-up charge of �63. There is also an annual operating charge of �20 payable by providers, who may choose to add this to the overall cost of finance to the household, depending on the size and length of the plan.
How can they be sure I'll save money?
They can't be absolutely sure. When you sign up, the calculations will be based on your current and past energy usage, but concern has been expressed by some experts that if there was a future change in circumstances that pushed up a household's bills ? for example, a couple have a baby, or an elderly relative comes to live with a family ? this could throw the maths out of kilter.
Tell me more about the cashback
This is a "first-come, first-served" offer to reward people for signing up. Up to �125m of government cash will be given away to householders who have work done.
Payouts include �100 for loft insulation, �270 for upgrading to an energy-efficient condensing gas boiler, �250 for cavity wall insulation, �650 for solid wall insulation, �150 for floor insulation, �50 for draught-proofing and �150 for new/replacement storage heaters.
There are no restrictions on what the money can be spent on. However, these rates are only guaranteed for the first �40m, after which they are likely to reduce, says the DECC.
Can I switch energy supplier if I take out a Green Deal plan?
Yes, you will be able to switch electricity company and continue paying your plan via your new supplier, provided the new supplier is taking part in the Green Deal payment collection system (it is thought most major firms will be participating).
Can I pay my Green Deal plan off early?
Yes, you have the right to do that, but your provider may charge early repayment fees, so check with them.
What if I move house?
If you move house, the person who moves into your old property will take on the repayments.
An Energy Performance Certificate (in England, Scotland and Wales) will show if there is a Green Deal plan attached to a property's electricity bill. If there is one, the certificate will show the improvements made, the repayment amounts and how long the new person will need to make repayments for.
If you are the new bill payer and you believe the existence of a Green Deal plan wasn't properly disclosed, you can dispute the charges, but must do so within 90 days of first being notified.
What happens if I can't/don't pay off my Green Deal plan?
If you default on your Green Deal payments, you will be treated the same as customers who default on their energy bills, says uSwitch.com. "So, just like if you don't pay your gas or electricity bill, you could be disconnected," it warns, adding that there are some safeguards in place to avoid this scenario.
Give me an example of how it might work
DECC gives the example of someone living in a large detached property off the gas grid, who has solid wall insulation (external, type 2) and loft insulation installed under the Green Deal.
It estimates the total cost of the work at �10,193, including all the administration, assessment and other costs that it reckons would be rolled in.
DECC puts the estimated saving for that household as a result of having this work done at �1,388 a year. However, the Green Deal plan repayment would be just �1,000 a year, assuming an interest rate of 7.5% and a 20-year repayment period.
So the annual net saving would be �388 in year one, and the department says it would expect this to grow over time.
Furthermore, the solid wall insulation would be eligible for a subsidy through the Energy Company Obligation (ECO) programme, which would reduce the payments further and increase the net savings made by the household.
Some might question these figures and assumptions, however. For starters, �10,193 for a package including external solid wall insulation and loft insulation for a large house sounds very cheap when one considers that the Energy Saving Trust website puts the cost of external solid wall insulation alone at between �9,400 and �13,000.
The Energy Saving Trust estimates that the annual saving a household would enjoy as a result of this measure is around �475 a year ? way below the hefty �1,388 figure quoted by the DECC. An annual saving of that level makes you wonder just how high their bills were before.
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