London, 31 August (Argus) — The UK is in the final stages of legislating the so-called Green Deal, aimed at creating a financial and administrative structure to enable widespread energy savings in houses, mostly through insulation. The Department of Energy and Climate Change (Decc) told Argus that it expects savings of around 17TWh in 2020 as a result of the scheme, although it has no savings target as part of the programme.

The heating savings will mostly affect gas demand as the fuel accounts for over 80pc of UK heating, with electricity accounting for less than 10pc.

UK households consumed around 293TWh of gas in 2011, down from an average of just over 360 TWh/yr in 2006-10. Demand peaked at 396TWh in 2005, and since then has declined by about 3pc/yr — albeit with significant weather-driven variation from year to year. An exceptionally cold 2010 boosted demand by 17pc that year, to 390TWh — but domestic gas consumption then slumped by a quarter in the milder 2011, to its lowest since 1989.

Assuming steady progress to a 17 TWh/yr reduction in gas demand by 2020 — and domestic gas demand this year broadly flat compared with 2011 — Decc's scheme could cut household demand by about 1pc/yr in 2013-20, not accounting for any other measures that households may take to reduce their energy consumption. That said, there is no obligation for households to make use of the service.

Insulate now, pay later
The scheme is founded on new financial arrangements that will allow service companies to borrow funds for their work from a finance provider, which will be repaid by householders through their utility bills. The utility can, but does not have to, be a service provider.

The idea is that householders use the savings on their heating bills as a result of the energy efficiency measures to repay the finance company, plus a rate of interest yet to be set. The debt will remain with the property should householders move away.

But the risk of measures delivering less than their expected energy savings lies with the householder — which could dissuade some from using the scheme. “If savings do not amount to as much as expected, the repayments will still have to be made,” Decc said.

The department pointed to a Green Deal guideline that it calls the “golden rule”, which “restricts the Green Deal provider to attaching a charge that is no higher than the estimated savings for a typical household”. But Decc conceded that “bill savings will depend on variables like consumer behaviour and energy prices, so the government cannot guarantee that the golden rule will be met on an ongoing basis”.

Companies wanting to provide services under the Green Deal — such as roof or wall insulation or new window installation — have been able to register since 8 August. The financial part of the legislation is likely to be ready in January, Decc told Argus.

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