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The commercial Green Deal: worth reviving?

12 September 2014  

The consultation for Minimum Energy Performance Standards for Commercial Buildings revealed that the Green Deal Finance Company is no longer offering funds for non-domestic Green Deal plans. 

The question this poses is whether or not this means the commercial Green Deal is dead or simply on pause – and this is a query to which no one seems to have an answer.  

In truth, the initiative has been far from a runaway success – only one commercial plan is in place that I know of, a hugely disappointing result given the amount of hope and expectation that surrounded the launch of the Green Deal back in January 2013. This means little has been done about reducing the carbon footprint of Britain’s commercial buildings through the scheme, and businesses have missed out on savings on their energy bills. 

This can be blamed, in part, on the fact that the domestic Green Deal has had such a hard time getting off the ground. It has meant that the government has focused its time, money and energy on trying to correct the problems with this aspect of the initiative. As a result, the commercial equivalent has been left to fend for itself. 

Fundamental flaws

But the sad truth is that there were fundamental flaws with the commercial Green Deal that should have been addressed and resolved at the start.  

The main problem with the commercial Green Deal is that it doesn’t work for its intended market. Most businesses in this country work out of leased premises, and often aren’t the sole tenant, so the decision to take up a plan is often dependent on the landlord giving permission. As the Green Deal is a long-term initiative, and most commercial leases are now under five years, according to figures from [risk analyst] IPD, it simply doesn’t make sense for a firm to take out a Green Deal. Add in the upfront costs of a commercial Green Deal and the fact that the annual loan repayments come with interest rates of between 7 and 8 per cent and you’re faced with a prospect that is totally unappealing to many businesses. 

This news means the responsibility for taking out a commercial Green Deal was always going to lie with commercial landlords, and, as discussed, the “sales pitch” for taking out a Green Deal is not the most appealing. A large number of firms will pay their energy bills as part of the building’s service charge, and in a world where everyone is still keeping a close eye on the outgoings and the commercial property market is competitive, most landlords will be unwilling to increase service charges to cover the cost of a commercial Green Deal. 

Owner occupiers

The only companies for whom the Green Deal is appropriate are those who own their premises – and even then the business case for making the investment is questionable. This is mainly because of the high interest rates on the Green Deal loans, but also because the long-term nature of the loans means the premises may be compromised as a business asset by having a Green Deal Plan attached to them.  

In fairness to the government, it has tried to boost the initiative with the publication of its Solar PV Strategy and the introduction of the ESOS programme. But the sad fact is that neither of these will be enough to create sufficient interest in the scheme. The Solar PV strategy, although ambitious – potentially boosts the market through the government’s commitment to rolling our Solar PV across the entire estate. 

But what isn’t mentioned is where the funding will come from, and it is hard to believe that local authorities will have the budget for a large-scale solar PV rollout. 

Equally, the ESOS initiative simply doesn’t have high enough sanctions to encourage businesses to have a Green Deal Assessment, which suggests that the government has done all it can to boost the commercial aspect of the initiative. 

The truth is that there is little merit in reviving the commercial Green Deal. 

What we need is an initiative that encourages and entices businesses to embrace energy efficiency, and there are too many issues with the commercial Green Deal to make this worthwhile. It is to be hoped that the government will learn from the failure of this initiative and develop a programme that helps British businesses join the energy efficiency drive. 

Sanctions or rewards

Convincing business of the commercial, environmental and reputational benefits of being energy-efficient clearly hasn’t worked – what we need is a programme that can persuade them to do so either with sanctions or rewards, and one that succeeds where others have so far failed.  

The ECA is the UK’s largest trade association representing electrical engineering and contracting companies. The electrical contracting industry employs 350,000 operatives and 6,000 apprentices. Its 3,000 members range from local electricians to national companies with several branches employing thousands. Members carry out a range of work, from domestic heating and lighting to cutting edge temperature control technology. Several hundred ECA members also install microgeneration, such as solar photovoltaic systems.

Bill Wright, 
head of energy solutions at the Electrical Contractors Association