Green Deal and ECO

On 18 October 2011, the Energy Bill received Royal Assent and became the UK Energy Act 2011.

The Act includes provision for the GB-wide " Green Deal" which is a framework to enable private firms to offer consumers energy efficiency improvements to their homes, community spaces and businesses at no upfront capital cost, and recoup payments through a charge in instalments on the electricity bill.

At the heart of the UK Government's proposals is the "Green Deal plan", an innovative financing mechanism which allows consumers to pay back through their electricity bills. This means consumers can see the Green Deal charge alongside the reductions in energy use which generate savings on their bill.

It also means that if they move out and cease to be the bill-payer at that property, the financial obligation doesn't move with them but moves to the next bill payer: Therefore, the charge is only paid whilst the benefits are enjoyed. In this way, the Green Deal differs from a conventional loan since the bill-payer is not liable for the full capital cost of the measures, only the charges due whilst they are the bill-payer. This is a market mechanism, funded by private capital, which is expected to deliver far more to consumers than top-down Government programmes.

UK Government are designing the Green Deal with the aim of making it available for businesses as well as households - enabling smaller businesses to access funding for energy efficiency improvements, and larger businesses to meet their obligations under existing schemes at lower cost. The Scottish Government are working closely with UK Government to ensure the design of the scheme is deliverable to maximum benefit in Scotland.

Alongside the Green Deal, the UK Government is planning to replace the existing energy company obligations. The new Energy Company Obligation (ECO) will focus energy companies on improving the ability of the vulnerable and those on lower incomes to heat their homes affordably, and on improving solid wall properties, which have not benefitted much from previous schemes.

A public consultation on the Green Deal and the ECO launched in November 2011 and closed in January 2012. The full text of the consultation can still be found at: http://www.decc.gov.uk/en/content/cms/consultations/green_deal/green_deal.aspx.  The UK Government’s formal response to the consultation is expected to be published soon.