National Audit Office charts green deal failure

Existing house

The National Audit Office (NAO) has produced a damning verdict on the Department of Energy and Climate Change’s (DECC) green deal and energy company obligation (ECO) programmes, which were intended to help make existing homes more energy efficient.

NAO says DECC’s efforts increased energy supplier costs and energy bills, and cost the taxpayer a total of £240m. The green deal failed to achieve value for money, says the NAO, because, “DECC’s design and implementation did not persuade householders that energy efficiency measures are worth paying for”. ECO added to supplier costs, which reduced its value for money, NAO concludes. It says ECO has generated £6.2bn of notional lifetime bill savings to 2015 in fuel poor homes, but adds that the true impact of the schemes on fuel poverty cannot be measured.

Demand for green deal finance fell well short of government expectations, with households only funding 1% of measures installed through the schemes with a green deal loan. The schemes have not improved as many solid walled homes as DECC planned.

The NAO’s investigation into DECC’s loans to the Green Deal Finance Company found that DECC expects not to recover its £25m stakeholder loan to the finance company, plus £6m of interest that has accrued on it, having based its forecasts on higher consumer demand than was actually achieved.

Amyas Morse, head of the NAO, said, “The Department of Energy and Climate Change’s ambitious aim to encourage households to pay for measures looked good on paper, as it would have reduced the financial burden of improvements on all energy consumers. But in practice, its green deal design not only failed to deliver any meaningful benefit, it increased suppliers’ costs – and therefore energy bills – in meeting their obligations through the ECO scheme. The department now needs to be more realistic about consumers’ and suppliers’ motivations when designing schemes in future to ensure it achieves its aims.”

Richard Twinn, policy advisor at the UK Green Building Council, said: “The green deal was a pioneering attempt to bring private finance into the home retrofit market, but poor management ultimately set it up to fail. High interest rates limited the amount that could be borrowed under the scheme, and a lack of long term incentives meant there was insufficient demand from householders. This was compounded by constant policy changes, which made it very difficult for the industry to invest.”

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