Green Deal may fail to attract investment participants

The consultancy has reached this conclusion following Green Deal wargaming sessions that it has hosted. This involved 24 building industry professionals role-playing as competing consortia of retailers, energy companies and banks – each charged with maximizing their own returns from any Green Deal investments.

The conclusion was that, if each of these participating interests is to return a satisfactory profit, then it is they – not the householder – who will obtain practically all of the financial returns from the resultant energy savings in a Green Deal Finance-improved building.

Based on the workshops experiences, BH assumes most investors will be looking for an internal rate of return between 11 and 15 per cent, particularly “due to the unknown risks attached to the Green Deal process.”

BH engineer Mark Dowson estimates that householders would see just 8 per cent of the money achieved via any energy savings. The remaining 92 per cent would go to the “investors” from retailers, energy companies or banks.

For a £20,000 investment delivering £500 of savings each year, just £40 would accrue to the householders. Their main gain would be from any building refurbishment and increased comfort, rather than economic, he concludes.

Even should subsequent occupants be more frugal, they will be faced with repayment levels through bills that have been set assuming higher baselines of energy use.

BH also concludes that the householder should really receive far more information before signing up, “such as realistic projections for long-term fuel reductions, more transparency regarding the benefits, and the disruption of different retrofit packages.”