Before the “Green Deal” is implemented, energy efficient improvements to properties are an expense incurred by the occupier effecting the improvements but benefit all future occupiers. The new proposals for the Green Deal under the Energy Act 2011 (“the Act”) will allow property owners to adopt energy efficient improvements at no upfront cost to the occupier. The improvements will be financed by accredited providers, and the cost will be recouped in instalments through energy bills.  The aim of the Energy Act is to reduce carbon emissions cost effectively.

There will only be an incentive for the current occupier to adopt energy efficient improvements if any supplementary charge attached to the energy bills is smaller than the resultant saving on the bill with the improvements. The Act introduces the Green Deal which is based on the principle that energy efficient improvements to properties are paid for by the resulting savings on gas and electricity costs; this principle is known as “the Golden Rule”. It will mean that energy bills for all occupiers, present and future, will be reduced and the owner of the property will benefit from the increased value of the property. (Note that for certain expensive measures for residential property, an extra subsidy could be available via the Energy Company Obligation.)

The government is obliged to devise framework regulations to establish a scheme for the authorising of Green Deal assessors, Green Deal providers or installers and to regulate their conduct in a Code of Practice. On 23 November 2011, DECC launched a consultation on the details of the Green Deal and the Energy Company Obligation (ECO), with a view to drafting these regulations. A Memorandum of Understanding has very recently been signed between the government and 22 organisations to become the first Green Deal providers.

It is likely that the Green Deal will come into force in Autumn 2012 and initially will apply to England only. Some of the fundamental principles that the Act will lead to are:

  1. Payments are recoverable as a debt against the bill payer. There will not be a charge against the property nor will future bill payers be liable for any arrears. Bill payers are liable only in respect of the period during which they are the bill payer.
  2. From April 2016, private residential landlords will be unable to refuse a tenant’s reasonable request for consent to energy efficiency improvements, where a finance package, such as the Green Deal and/or the Energy Company Obligation (ECO), is available.
  3. From April 2018, it will be unlawful to rent out residential or business premises that do not reach a minimum energy efficiency standard (the intention is for this to be set at EPC rating ‘E’). This might mean that Landlords will be forced to enter into or consent to the deal.