A radical new way of funding energy efficiency and low carbon technology in our housing stock was today proposed by the UK Green Building Council. Last month the Government published an ambitious target for 7 million homes to have received a 'whole house' package of green refurbishment by 2020, saying it wanted to pilot a so-called 'Pay As You Save' scheme to help meet this target.
'Pay As You Save' describes a system in which the cost of energy efficiency and low carbon measures is paid for over a long period of time removing the upfront cost for the householder and allowing them to save more on energy bills than they make in repayments.
Today the UK Green Building Council publishes the most comprehensive analysis to date of how a Pay As You Save scheme could be practically implemented in the UK. The proposals, developed with industry, would allow home owners and landlords to access up to £10,000 of finance for accredited energy efficiency measures, such as solid-wall insulation, and A-rated boilers, reducing carbon emissions from the home while also creating thousands of new jobs.
Key findings and recommendations include:
Up to £5 bln. (approx. 5.85 bln.) of capital could be sourced from the private sector every year for investment in greening the UK's existing housing stock. The money should be held by a third-party finance body, underwritten by Government in order to keep interest rates low for householders.
A range of properly accredited 'Low Energy Refurbishment Providers', such as high street retailers, energy companies or builders, should be able to access this finance up to £10,000 per household - and in turn offer the Pay As You Save proposition to the householder.
Primary legislation would be required to enable the local authority to create a Pay As You Save 'Local Land Charge' via which the money is repaid. The Charge attaches to the property and not to the owner and it does not appear on the title of the property at the Land Registry. Instead, it is kept upon the Local Authority Register of Local Land Charges and in effect is 'passed on' to future owners until the charge expires after 25 years.
The local authority maintains a schedule of payments to be made for each property, issuing the PAYS Charge monthly. Debt risk is managed by the local authority, with some debt risk potentially mitigated by a level of support from the government.
Paul King, Chief Executive of the UK Green Building Council said: "This innovative proposal would provide the finance to trigger a revolution in household refurbishment, creating thousands of new jobs and significantly cutting carbon emissions. Both Government and opposition parties have voiced their support for the principles of a scheme like this what's needed is to get on with it."
David Adams of KNAUF Insulation and Chair of the UK-GBC PAYS task group said: "We currently waste a huge amount of energy in our homes because they are so badly insulated. A Pay As You Save scheme would make it possible for individuals to refurbish their homes using accredited suppliers, with no upfront costs. Industry has the expertise to make our homes more energy efficient and this scheme would create the finance to allow this to happen."
Michael Barlow, Partner, Burges Salmon: "We face a huge challenge to improve the energy efficiency of our housing stock, and there are no easy solutions. But this report shows that the legal barriers to the implementation of a Pay As You Save scheme could be overcome through new legislation, which would provide householders with an innovative way to finance the upgrade of their home, reduce their energy bills and tackle climate change."
Chris Brown, Chief Executive, Igloo Regeneration: "It is a challenging time to be raising capital in these quantities but this structure provides a robust basis for financing this critical programme."