Councils to kickstart Green Deal revolution
17 Oct, 2011
New local authority-backed financing model aims to scale up Green Deal programme....
They are already responsible for upgrading your roads, drains, and countless other public services, but local councils could also soon find themselves at the heart of the government's ambitious plans to provide green upgrades to the nation's homes and offices.
To date, ministers promoting the planned Green Deal energy efficiency scheme ahead of its launch next autumn have predicted private sector companies, such as retailers and energy firms, will lead the development of new green home services and financing models.
However, there is now growing support for giving local authorities a central role in the rollout of the Green Deal, with experts saying their position as relatively well trusted service providers could encourage widespread take-up of green home makeovers.
The largest Green Deal project in the UK is already being pursued by Birmingham City Council, which last month began a procurement process designed to identify a service provider for its planned £250m domestic energy efficiency scheme.
A group of councils in the North East led by Newcastle City Council are also investigating a similar model, while a number of other local authorities are said to be investigating how they can drive Green Deal adoption.
The councils are looking at deploying a financing and service delivery model developed by a loose coalition of firms and NGOs including the Energy Saving Trust, the Ecofin Foundation, the Climate Bonds Initiative, and Marksman Consulting.
Speaking to BusinessGreen, Christoph Harwood, a partner at Marksman Consulting, explained that councils are well placed to set up not-for-profit companies that can then act as the financing vehicle for large-scale building retrofit programmes.
"Local authorities can borrow from central government at a rate of one per cent over gilts or access bank finance at reasonable rates," he explained. "Under the model we are proposing they could set up a not-for-profit company that would borrow the necessary capital and then appoint a service provider, such as an energy company or building firm, to do the work."
He added that the local authority backed firm could also raise capital by accessing the Energy Company Obligation (ECO) funding that utilities must provide as part of the Green Deal to finance improvements to hard-to-treat homes and those facing fuel poverty. He also suggested that the company could potentially raise finance from the mooted national Green Deal Financing Company.
Under the propososed model the appointed service company couldb then undertake full home makeovers, deploying both energy efficiency measures and onsite renewables such as solar panels. This would generate long-term stable returns for the local authority-backed firm through Green Deal repayments on energy bills and feed-in tariff incentives.
Harwood said local councils potentially have a significant advantage over private sector-led Green Deal initiatives as they tend to be more widely trusted than many private firms.
"Survey after survey shows councils are well trusted," he said. "If something falls off your home in 20 years' time, you can't guarantee the private firm that fitted it will still be there, but the council is bound to be there in some form.
"If the Green Deal is to deliver the carbon savings the government wants, it has to be done at scale, and councils will prove much better at driving take-up."
Sean Kidney of the Climate Bonds Initiative said the group is also looking at whether councils may be in a position to mandate Green Deal makeovers for some areas, or alternatively to require households to "opt out" from improvements, with teams providing a free building energy audit unless people refuse the offer.
"People are much more likely to respond if it is a team from the council that can say they are doing the whole street," he said.
Kidney added that large-scale local authority-led Green Deal initiatives will also allow councils to bundle up the resulting debt and access the bond market in order to achieve more favourable interest rates.
"As it stands, the Green Deal will not be big enough to access the bond market," he said. "But this approach could deliver a large enough market to give the bond market the liquidity it needs."
sourced from Business Green
By James Murray