Updated 28 April 2013
WHAT YOU CAN DO
Financial Support for Insulation and Domestic Renewables
This page summarises various schemes to help make insulating your house and installing efficient, renewable energy sources more affordable.
The government’s Green Deal, the new centre-piece of the programme to upgrade the energy efficiency of the UK’s housing, is now running. We have an introduction to this complex scheme below. In order to help the scheme get started, there is a cashback deal for early adopters. Other grant schemes have now ended, including the Warm Front scheme for people on benefits.
The Department of Energy and Climate Change (DECC) introduced a generous Feed-in Tariff in April 2010. This encouraged installation of renewable technologies: solar photovoltaic panels, small wind turbines, small-scale hydro, etc. However, there have been major reductions and new restrictions in the Feed-in Tariff for solar photovoltaic systems. The first set of changes affected systems registered from March 2012, with more changes for systems installed from 1 August 2012 and again from 1 November 2012. See below for up-to-date information.
DECC has also announced a Renewable Heat Incentive to encourage solar hot water, heat pumps, and other sources of heating. After some delays, the first phase, for large-scale systems, started in November 2011. However, for domestic users the scheme has been postponed – yet again – until spring 2014. In the interim there is a grants programme called Renewable Heat Premium Payments, which runs to March 2014. These are for solar hot water panels (for all houses), and for ground-source and air-source heat pumps and biomass boilers for houses without mains gas heating.
Insulating your home, which is often a simple matter of loft and cavity wall insulation, is the most effective way to save energy and reduce your bills. (Photo at right shows installation of cavity wall insulation.)
However, the system of grants for free or inexpensive installation of cavity wall and loft insulation that was funded by the energy companies finished at the end of 2012. The Warm Front scheme for people on benefits ended as well. The main programme of financial aid for the future is the government’s Green Deal, which started in January 2013. You can find information below about the Green Deal. Early users of the Green Deal are being offered a cashback bonus to help this complex programme get started.
A boiler scrappage scheme was announced in January 2010. Households with the least-efficient G-rated boilers could apply for vouchers worth £400. However, only 125,000 vouchers were issued, even though there are about 4 million eligible boilers in England. All vouchers were taken up in less than three months and the scheme was closed. However, some energy suppliers have carried on with the additional discounts similar to those offered in connection with the scheme so it is worth looking into these if you have an old, inefficient boiler.
Financial Support for Renewable Generation
This section covers the UK’s provisions for supporting small-scale renewable energy generation: the Feed-in Tariff begun in April 2010 to pay for electricity generation, the interim Renewable Heat Premium Payments, and the proposed (and long delayed) Renewable Heat Incentive that is now planned to begin for domestic users in sprint 2014 to pay for producing heat and hot water. More detailed information may be found on the Department of Energy and Climate Change (DECC) and the Energy Saving Trust websites.
The Feed-in Tariff (FIT) aims to increase small-scale (up to 5 megawatts) electricity generation in the UK. It has already shown that by expanding the market, expensive technologies such as solar photovoltaic panels have become cheaper. The scheme, which started in April 2010 and will run for at least 20 years (up to 25 for solar photovoltaics), covers a range of technologies.
What makes the FIT unusual, compared to schemes in other countries, is that it rewards all generation, not just what is exported to the grid. The reasoning behind this is that electricity used locally does replace energy from the grid, and is efficient because it reduces losses in transmission. It also makes consumers more aware of how they use their energy and so, hopefully, leads to lower consumption.
The FIT replaced the up-front grants from the Low Carbon Buildings Programme. The Renewable Obligations programme, which is primarily aimed at large-scale generation, no longer covers domestic systems. Systems installed before July 2009 were transferred to the FIT, but receive a uniform low tariff because DECC states that the FIT aims to encourage new systems, not reward existing ones.
The electricity generating technologies covered are:
The tariffs differ between different technologies, and for different-size systems – they are higher per kWh for smaller systems. The tariff for a particular system is fixed at the time of installation but is indexed for inflation. However, as time goes on and the cost of the systems (hopefully) decreases the tariffs for new installations will be reduced – this is called ‘degression’. There will be periodic reviews of the operation of the scheme and the tariffs being paid. Payments are tax free.
The Energy Saving Trust has a simple calculator to allow you to estimate how much you would get under the Feed-in Tariff.
Both the system components and the installer must be approved under the Microgeneration Certification Scheme. In its original form, other measures to reduce energy consumption (insulation, heating controls, lighting) were not a requirement for receiving the FIT. However, since April 2012 properties installing solar PV must have Energy Performance Certificate ratings of at least D in order to get the full tariff; otherwise they will get just 9p per kWh. However, this requirement does not apply to other technologies.
The register of installed systems is held by OFGEM. Payment is made by electricity suppliers and comes from them, not from the government.
Table of tariffs
A condensed table of Feed-in Tariffs for domestic-scale new installations follows. These rates include annual inflation indexing. Exports to the grid from older systems get an extra 3.3p per kWh, while systems registered from late 2012 (marked with a *) will get a higher rate of 4.64p per kWh. Systems on output boundaries will get the higher rate. A table with full details, including larger systems, may be found here.
The FIT scheme for solar PV was very successful initially, with many more installations than predicted. This was because the tariff had been set quite generously, combined with falling costs for solar panels. DECC responded with a series of reviews to reduce the payments – these were held earlier than had been promised.
The first review was concerned with very large PV systems of over 50 kW. Many of these were being installed on community buildings such as schools and village halls. However, because the FIT gave a good return on investment, some companies had been installing very large systems for profit, often on farmland. In March 2011 DECC announced an immediate, huge reduction in the FIT for new large systems, e.g. systems from 250 kW–5000 kW reduced from 30.7p per kWh to 8.5p per kWh. DECC said that this was to stop these large systems getting a disproportionate share of the FIT funding. However, the cut was so big that it discouraged almost all plans to build such big systems, including many community projects. The solar PV industry said that such a big change without warning made it impossible to plan for the future or to obtain loans to finance expansion.
During 2011, the cost of PV systems fell and people also anticipated the reductions in the tariff that had been scheduled for April 2012. This produced a surge in new systems. On 31 October 2011, without warning, DECC launched an early review of FITs for domestic systems. They claimed that the large number of installations was going to cost too much over their 25-year lifetime and that reduced prices meant returns on investment were much higher than expected. DECC proposed to cut the tariff for new systems (but not existing ones) by more than half, and make other drastic changes such as requiring properties to achieve an energy performance rating of at least C. The lower rate was to apply to properties registered from mid-December 2011, before the consultation had even closed. (You can see our response to that consultation here). DECC were taken to court and the retrospective date was ruled illegal; a series of appeals were all turned down but caused nearly five months of chaos and confusion for consumers and for the solar PV industry.
The result was to delay the effective date of the new, much lower tariff (21p per kWh) to March 2012. In addition, systems registered from April 2012 are required to have an energy rating of at least D (an improvement on the original proposal of C).
However, even before these measures took effect, DECC launched another consultation proposing major changes to the future operation of the solar PV tariff. The result was an even lower tariff for new domestic systems of 16p per kWh starting in August 2012, with continuing reviews (aimed at reducing the tariff further, and based on sales of PV systems) every three months – the higher the sales the bigger the reduction. If the energy efficiency requirement of D is not met these sytems will get a lower rate of 7.1p per kWh. In addition, the lifetime of the tariff for these systems was reduced from 25 years to 20 years. On the other hand, there were some improvements on the original DECC proposals: indexation of the tariff with inflation will be retained, and the export tariff for these new systems will be higher, at 4.5p per kWh. Installations of more than 25 systems (e.g. community schemes) will get 90% of the full tariff rather than the 80% introduced in the first review.
In parallel, another review looked at the FIT for other types of electricity generation. Unlike solar PV, the other technologies have had fewer systems installed than had been predicted, and the proposed changes in the level of the tariffs are not drastic. Reviews for these technologies will take place once per year.
The initially generous Feed-in Tariff terms led a number of firms, including British Gas, to make what sounded like an attractive offer. They will install solar panels on your roof free of charge, and any of the generated electricity that you use will save you the cost normally paid to your electricity supplier. They claim savings of up to £150 per year.
These offers are not as good as they sound:
To estimate how much you might get from your own panels under the Feed-in Tariff, use the Energy Saving Trust's calculator.
The late-2011 review of the tariffs reduced the rate of FIT for anyone owning 25 or more systems to 80% of the new, much lower rate. In August 2012 this changed again to 90% of the tariff, which at the same time was reduced to 16p per kWh. The effect of the much-reduced feed-in tariff on rent-a-roof schemes is not yet known, but it would not be surprising if they disappeared.
* Although we welcome the use of renewable energy wherever possible, we believe that if you can manage to pay for solar panels yourself, or even if you can borrow the money at a low interest rate, then you would be better off buying the panels yourself and benefiting from the full Feed-in Tariff, which provides an index-linked and tax-free income for 20 years.
The Renewable Heat Initiative (RHI) is aimed at a range of technologies and systems, small and large, from individual owners and landlords in both private and social housing to community groups and businesses of all sizes. The short-term target is for 15% of all UK energy consumption (almost half of which is for heating) to be from renewable sources by 2020. The RHI will try to help with that by making renewable heating a reasonable investment. Other goals include lowering the prices for renewable systems by expanding their markets, and increasing the UK’s energy security by reducing dependence on imported fossil fuels. Here we will cover the private domestic proposals of the RHI.
This scheme replaces the up-front grants from the Low Carbon Buildings Programme. Systems installed before July 2009 are not eligible – DECC states that the RHI aims to encourage new systems, not reward existing ones. The RHI is said to be a world first. This means that, unlike the Feed-in Tariff, there were no models elsewhere from which to gain experience. Therefore some of the proposals are tentative and changes will certainly occur. In addition, the money for the scheme is going to come directly from government funds (unlike the Feed-in Tariff) and so is limited by the crisis in public funding.
The RHI for large-scale systems started up in November 2011. However, take-up is reported to be lower than predicted. For domestic users, start-up was first delayed to October 2012, delayed again to summer 2013, and more recently until spring 2014. However, domestic systems installed from 15 July 2009 will still be eligible.
With the exception of solar thermal panels, which are considered as a somewhat special case, the main thrust of the scheme concerns domestic central-heating boiler replacements. The tariffs are therefore aimed at reimbursing the extra cost of renewable technologies compared to buying a replacement boiler.
Detailed domestic RHI proposals are now out for consultation – the results are due in March 2013. Here we describe the main points of the proposals. These only cover existing houses – whether newly built houses should be covered at all by the RHI is raised in the consultation, and if they are that will only happen after the scheme is underway. Second homes are not covered.
As an interim measure, Renewable Heat Premium Payment grants were announced for the period from August 2011 to March 2012. With the RHI delayed, a second round of grants running from May 2012 through March 2013 was announced, and has now been extended until March 2014. Most people in receipt of a Renewable Heat Premium Payment will be eligible for RHI support once it begins.
Domestic technologies covered
The heat-producing technologies that are proposed for the start of the Renewable Heat Incentive for domestic installations are:
Other technologies that might have been included but are not in the initial domestic proposals include air-to-air heat pumps, geothermal energy, renewable combined heat and power, biogas and bioliquids. (Some of these are more appropriate for large-scale use.)
Biomass-only boilers and biomass pellet stoves with back-boilers will be eligible for the RHI, provided they meet 99% of the peak space-heating load of the property. Fuel sustainability and air quality must also be taken into account. It is proposed that only suppliers (e.g. wood pellet merchants) certified under a new system must be used. Boilers will have to comply with limits on particulate and nitrogen oxides emission.
Only one of the ‘boiler-replacement’ technologies may be installed in a property, but it is permitted to also install solar thermal panels and receive the tariffs for both systems.
Unlike the Renewable Heat Premium Payments (see below), the proposals are aimed at all homes, without restricting some technologies to those off the gas grid. (It might be argued that if funds are tight the focus should be on properties without gas, in order to do the most good.)
Recipients of the RHPP will have their RHI payments reduced by the amount of RHPP they received.
The tariffs would apply uniformly to all systems up to 45 kW thermal, with no differences according to size. Systems above that level will not be covered, and that may exclude some very large houses.
The proposals discuss the duration of the tariffs. Although the systems installed are meant to work for 20 years, it is concluded that a faster payback than over the full 20 years is desirable but that simply giving up-front grants (as was done in the past) has disadvantages. Ttherefore a tariff duration of seven years is proposed.
A serious problem is that, unlike electricity, heat output is difficult to measure accurately, especially in small installations. The second phase of the Renewable Heat Premium Payments scheme included trials of metering the heat. This had difficulties, so it is proposed only to meter a few installations on a statistical basis. Therefore, payments would be based on what the installer estimates (‘deems’) the annual output of the system will be, in kilowatt-hours. An exception is made for heat-pump systems where a backup fossil-fuel boiler is felt to be necessary, where heat metering will be required in order to monitor how much of the heat used is renewable.
Finance for the up-front costs of the renewable technology (in the form of long-term loans) will sometimes be possible via the Green Deal.
It is proposed that in order to receive the domestic RHI, consumers will be required to have completed all the so-called ‘green ticks’ on their Green Deal assessment that relate to the thermal efficiency of the house, with the exception of solid wall insulation. The ‘green ticks’ will be for improvements that are economically reasonable.
As with the previous up-front grants, both the system and the installer must be approved under the Microgeneration Certification Scheme. The register of installed systems will be held by OFGEM.
Proposed level of tariffs
For all but solar thermal, a range of possible tariff rates is proposed, though these are subject to change and since they will come from government funds are much more likely to go down than up. The government says that it will confirm how the RHI for householders will work and publish the tariff levels in summer 2013. It is expected that the scheme will be up and running for householders in spring 2014.
To get some feeling for the annual payments, a small house might use roughly 12,000 kilowatt-hours per year for heating while a large one might use 20,000 kilowatt-hours. So a small house with an air-source heat pump might get £828 – £1380 per year, while a big house with a ground-source heat pump might get £2500 – £3460 per year.
For solar thermal panels, a normal system might produce 1200 – 1500 kilowatt-hours of energy per year, which would mean a payment of £208 – £260 per year.
Over the duration of the tariffs the number of new installations will be monitored and, based on take-up, the tariffs will be gradually reduced (‘degressed’). There will be reviews from time to time to evaluate progress in various technologies and to adapt to changes in their costs.
These provide up-front grants to cover installation of renewable heating technologies, such as solar hot water panels, heat pumps, and biomass (e.g. wood or wood pellet) boilers. Grants for solar thermal panels are available to all houses. However, grants for central heating technologies are only for houses that use heating sources other than mains gas. This includes electric heaters, or fossil fuels such as heating oil, which are more expensive and have a higher carbon content than gas.
The scheme was planned to end on 31 March 2013. However, with the Renewable Heat Incentive delayed, it has been extended through March 2014.
It is run by the Energy Saving Trust – there is more information on their website, and additional background on the DECC website. Householders must have basic energy efficiency measures in place before applying, and grants will be available on a first-come first-served basis. Installers and products certified under the Microgeneration Certification Scheme must be used. The following technologies are included:
Systems installed under this scheme will also be eligible for long-term support through the Renewable Heat Incentive (RHI, see above), providing they meet the RHI’s criteria when it is introduced – final details of the RHI for domestic systems have not yet been announced.
The Green Deal is promoted as the centre-piece of the government’s programme to upgrade the energy efficiency of the UK’s housing stock. The Green Deal basically consists of a low-interest long-term loan to help pay for various improvements such as insulation (including solid walls) and renewable energy generation. The loan is provided by the private sector from a central fund – very little government money is involved. The loans would be paid back via electricity bills, in amounts said to be equivalent to no more than the resulting savings on energy bills. An important benefit is that homes would be wamer and more comfortable. In order to help the scheme get going, there is a cashback deal offered to early adopters which we describe below. However, publicity for the Green Deal has so far been almost invisible.
Part of the appeal will involve the forthcoming Renewable Heat Incentive (RHI, see above), especially for people who cannot heat their homes with gas. The RHI will provide continuing payments for such things as solar thermal hot-water panels and heat pumps.
An important feature of the scheme is that a large take-up from community groups and social housing is hoped for. This will not be discussed here, as this page mainly concerns privately owned housing. Social housing providers are, or should be, developing strategies to use this scheme to benefit their tenants. If you live in social housing you should contact your housing association for more details specific to your circumstances.
The government acknowledges that the scheme is very complex, and will take some time to get going properly. An important factor is that it aims to let the market decide on what deals to offer. For example, some firms might offer very low (or no) interest on the loans, although a typical rate of 7.5% is assumed. A wide variety of important questions and critical points have been raised about the Green Deal, and even the scheme’s supporters seem cautious about how successful it will be. One of the big issues is how effective the planned system of regulation and controls will be.
How it works
Consumers start by arranging a survey by a Green Deal assessor, who then suggests how best the property can be improved. An Energy Performance Certificate assessment is also required. The criterion for granting a loan is that the estimated savings on bills should exceed the cost of the work to be done. There is a long list of measures covered (see below), but such things as improved insulation and new boilers will feature frequently. The installation firm informs the electricity supplier, so that the loan repayments can be added to electricity bills.
The government aims for a nominal interest rate of 6.9%. However, providers will set their own rates, probably in the range 6–9%. It might turn out to be cheaper to borrow the money outside the scheme and pay up-front.
The length of the loans will vary depending on the type of work selected and its potential impact on bills. Very expensive work, such as solid wall insulation, a new boiler or double glazing, may require a partial up-front payment.
The loans remain with the property, so purchasers of the property have to take on the obligation. This might cause problems when selling the property.
Although some firms may offer deals that include things like free assessments, fees and prices are not fixed in any way and consumers will clearly have to sift through a variety of plans from different companies to see what is included and what the total costs and rewards will be.
Companies selling Green Deal products must be accredited, and their staff trained. The aim is to try to avoid the mis-selling and dodgy practices that have occurred in selling energy tariffs, insulation, and solar thermal and photovoltaic panels. There will be an ombudsman service to deal with complaints.
What is included
A large number of improvements would be eligible:
In order to help the Green Deal get started, the government offers a cashback deal for early users. Cashback will be capped at 50% of the costs of the work. A total of £125 million has been allocated, and the first-come first-served offer will go on until the money has been used up. However, the rates paid may be reduced after the first £40 million has been spent
Examples of the maximum payments for various items include: £100 for loft insulation, £250 for cavity-wall insulation, £650 for solid-wall insulation (but you must insulate at least 50% of the wall area), £50 for draught proofing, £310 for a new (condensing) oil boiler, £270 for a new (condensing) gas boiler, £70 for new heating controls, up to £320 for double or triple glazing (depends on area) and up to £230 for secondary double glazing (depends on area).
The cashback is open to any householder making energy saving improvements, including owner-occupiers, people renting privately or in social housing. Landlords, both private and social, are also eligible where they pay installation costs. To qualify you must have a Green Deal assessment carried out and then get quotes from a Green Deal provider before applying for a cashback voucher. Some providers will be able to apply for you. The work must be completed by a Green Deal provider within a specified period.
You can only make one cashback claim, but it could cover a full package of improvements recommended by the Green Deal assessment – the more improvements that you make, the bigger the cashback. Note that if the Green Deal assessment recommends loft or cavity-wall insulation, the cashback will only be paid if these are done as well.
There is no requirement to actually take out a Green Deal loan – the requirements are to get the assessment and the work done by Green Deal providers.
There is an information leaflet here. It gives the rules, procedures, restrictive conditions and a complete list of payments for various types of work.
Comments, possible problems and questions
Will the private-sector Green Deal loans be attractive enough? They need to generate the billions of pounds worth of work needed to radically improve the energy efficiency of the UK’s housing stock, including huge numbers of old houses that need major, expensive work. A government impact assessment suggests that the number of loft and cavity-wall insulation installation jobs, for example, might drop to a fraction of what’s being done now when the offers (see Grants, above) of free or cheap installation disappear, to be replaced by loans. It is not at all clear what, if any, incentives willl be provided. David Kennedy, chief executive of the government's official advisors, the Committee on Climate Change, has warned: ‘We think there is a significant risk in leaving it to the market, as that has never worked anywhere in the world and is unlikely to happen in the UK.’
A serious criticism is that the loan depends on the estimated potential savings from what is installed. The estimate is calculated using complicated formulas that do not take account of individual circumstances and lifestyles within each property. The estimates should be based on detailed, actual energy usage data rather than just average figures, as this calculation will affect the size of loan. Things are further confused because energy prices change frequently, with the added complication that switching suppliers and tariffs will be allowed. Working out the estimated savings accurately thus sounds nearly impossible.
Another problem is the cost of the initial survey. If substantial work is then carried out that will probably not be a big factor, and some firms will offer to pay back the survey fee if work is ordered from them. But if the work to be done is minor, such as loft insulation, or if the householder decides not to go ahead then having to pay up-front for the survey looks like a substantial deterrent to people.
The government would like a wide variety of firms involved, from the big energy companies and retailers down to small local firms. So far, only a very small number have signed up, most notably only British Gas and npower of the ‘big six’ energy suppliers. Major retailers such as Tesco or B&Q have not yet done so, and many firms both large and small are waiting for more information and to see how the scheme is working out.
The Green Deal may encourage doorstep selling. If sales people are on commission
for getting new business, it is very difficult to ensure that correct and full
information on energy savings and costs will be given to potential customers.
In addition, other products or extra work (such as repointing or rewiring)
may be sold, whether or not it is needed or reasonably priced. Despite advice
about never buying under pressure on the
cold callers, there will always be people who do not take the time and trouble
to shop around, wrongly trust the accuracy and completeness of information
given, or simply sign up inadvertently.
It is not clear whether the Green Deal quotes will be provided in a clear and comparable format across all providers.
There does not seem to be any independent inspection of the work done, to check that it was carried out properly.
Tying the loan to the property may sound good to the purchaser, but will future house purchasers always want to take on what is left of a loan? Many will probably ask for the seller to pay off the plan. And will there be high fees for early redemption?
A similar scheme in Germany only charges interest of 1–2%, and has insulated more than two million homes. Critics have said that the expected Green Deal interest rates of around 7% are too high, and along with the scheme’s complexities make it not nearly attractive enough to be successful. Money can be borrowed commercially at similar rates, without having to follow the Green Deal procedures and repayment arrangements.
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© Blewbury Energy Initiative 2013