Question 31
Were we to take legislative action3what would be your preferred option based on those set out above? Do you agree that scoring uplifts is likely to be the optimum approach? Consultation response
Two options to incentivise blended ECO and Green Deal finance were detailed in the consultation document, namely to legislate to require blending or a scoring uplift or bonus within legislation. The response to this question was varied, with a large number of respondents having no comment and only a small number either agreeing or disagreeing. Most respondents who answered the question provided more nuanced views of the issue. One housing organisation expressed concern that legislating for blending could disadvantage housing associations as it was felt that the Green Deal currently does not meet their needs. Energy suppliers were also sceptical, pointing out that ECO is a legal obligation whereas the Green Deal is a commercial scheme, although their collective view was that a scoring uplift would be required if the legislative route was taken. An energy efficiency body expressed support for an uplift that would reward real innovation in financing, particularly with respect to new private sector funding sources.
Government response
At this time, Government will not pursue legislative options to drive blending of ECO with Green Deal finance. Blending however remains a key priority for Government, as it is fundamental to keep the cost of ECO as low as possible. There is an inherent incentive for energy suppliers to blend with other sources of funding, in order to reduce the overall cost to them and their consumers of delivering the obligation. Therefore before bringing forward legislative options, Government will monitor closely the impacts of several initiatives, including the impact of GDFC’s efforts to reduce the complexity of the Green Deal Finance offer, and the SWI Minimum Threshold. Government will continue to engage with energy companies and the supply chain to collect evidence on the use of blending and the barriers to its use. In particular, Government intends to undertake a call for evidence on the delivery of SWI using blending, in order to reach a greater understanding of the ways in which Green Deal Finance and ECO can work together and the barriers to uptake.
Importantly, Government will continue to work on streamlining the Green Deal, which should address some respondents’ concerns about the Green Deal finance product not being sufficiently appealing to customers. We will continue to work with stakeholders on this, and
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Blended ECO and Green Deal Finance
welcome any further feedback on how the streamlining work can support blending and make it a more attractive proposition to both suppliers and householders.
In terms of the specific legislative options included in the consultation document, respondents noted that a mandatory blending requirement would introduce complexity and have an impact on the cost-effectiveness of investment decisions made by suppliers. It was noted that this option could also lead to potential mis selling, unless appropriate safeguards were being put in place. Other respondents were concerned that providing uplift to measures delivered using blended finance would reduce the overall ambition of the targets, unless these were revised upwards to compensate.
Government will keep the option to legislate under review, should it become apparent that this is needed in order to ensure that blending does take place at the scale needed. Should we decide on the need to legislate, we will consult with stakeholders on the options.
Question 32
What are your views on a scoring uplift for blended finance and could you provide evidence for your view
Consultation response
Most of those responding opposed any legislative action to drive the delivery of blended finance, the arguments put forward include:
a) That this is something which should be left to the market;
b) seeking to drive the market in this way would be likely to drive up delivery costs;
c) If blended finance was an attractive product then it would be naturally taken up, the focus should therefore be on understanding why there has been limited uptake of blended finance and addressing any barriers identified;
d) It is undesirable to force/incentivise people to sell a “financial product”, it creates the danger of miss-selling, unethical behaviour and people being induced to enter into deals which may not be suitable to their circumstances; and
e) Allowing scoring uplifts would further dilute what is delivered under ECO.
However, in terms of options for legislation, providing for some form of scoring uplift was generally felt to be the least worst option.
Government response
The Government does not at this stage propose to pursue legislation as an option to drive increased delivery of measures supported by blended finance. This is because we are currently
Detailed analysis of consultation responses and the Government’s response
engaged in a process to improve and streamline the Green Deal which should make it a more attractive proposition. We are also particularly working to identify how the Green Deal Finance offer can improved, including looking at changes to the Golden Rule. We also continue to work with energy suppliers to understand what the barriers to delivering more blending are and how these can be overcome.
We are also in the process of rolling out the new Green Deal incentives packages and we believe it is important to see how the market continues to develop in light of these. However, we continue to believe that the delivery of measures using blended finance has important benefits, and will be monitoring uptake levels. Should the market for ECO blended finance not develop in a manner we consider optimal, then legislation still remains an option and we may look to consult further on it.
The role of customer contributions in Affordable Warmth