U.K. Starts Home Energy-Efficiency Program Amid Opposition Fire

The U.K. started a program to boost home energy efficiency, enlisting Centrica Plc, EON SE and SSE Plc amid criticism its Green Deal will fail to lure households that risk paying more for improvements than they save on bills.

The nation’s 26.9 million homes will from today be able to pay for upgrades such as loft or wall insulation through a charge added to power bills, which should then be lower because of improved efficiency, Energy Secretary Ed Davey said.

“It has the possibility of transforming British housing stock,” more than doubling insulation industry jobs to 60,000 by 2015, and bringing billions of pounds of investment, he said at a briefing in London. Repayments shouldn’t exceed efficiency savings, he said, although the government can’t guarantee that.

The country needs to cut energy demand to meet targets to lower carbon emissions 34 percent from 1990 levels by 2020, while reducing consumer power bills as fossil-fuel costs rise. U.K. buildings are among the world’s least efficient, accounting for 38 percent of Britain’s greenhouse gas emissions, according to the country’s Department of Energy and Climate Change.

Environmental groups such as the Green Alliance say the U.K. plans aren’t generous enough to interest consumers. Asked at a briefing last week why the program had attracted only five signups since opening for registrations in October, Davey and Climate Change Minister Greg Barker said the long-term Green Deal hadn’t officially started and would take time to ramp up.

Critical Reaction

“The whole point of the Green Deal is that households are meant to save money,” Luciana Berger, climate spokeswoman for the opposition Labour Party, said in a statement. “But with rip-off interest rates, hidden charges and penalty payments, the Green Deal could end up costing people more than they save.”

Overall interest rates on a 5,000 pound ($7,900) loan under the program would be charged at an estimated annual 7.67 percent to 7.96 percent for 10 to 25 year maturities, according to data on the Green Deal Finance Co.’s website. The figure for 1,500 pounds over 25 years would be a maximum 9.34 percent, it said.

Centrica’s British Gas, EON and SSE are among providers for the program, which offers 45 possible improvements, including water and heating boilers, double glazing and draught proofing. A three-bed semi-detached house could save about 275 pounds a year fitted with solid-wall insulation, according to Davey. Households may spend as much as 10,000 pounds under the deal.

“The Green Deal is a game-changer that will help people be able to afford energy in the future,” said Ann Robinson of the price-comparison service uSwitch at the briefing with Davey.

Average combined gas and power bills rose 10 percent since January 2009 to 1,342 pounds a year, according to the regulator, Ofgem. The number of U.K. households in fuel poverty in 2010 was estimated at about 4.75 million, or 19 percent of the total, government data show. Fuel poverty is when a household needs to spend more than 10 percent of its income on fuel for heating.

“Nearly 8 million homes have solid walls. Only 2 percent have been insulated,” Davey said. “There are huge savings for people living in those homes and a huge amount of carbon that can be saved to go towards our climate change targets.”

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