UK Green Bank Update
What started out as an idea to make the UK government the “greenest government ever” could in fact be becoming a failing scheme. The target of 10,000 people to sign up to the “green deal” (a scheme supported by the green investment bank) by the end of 2013 set by the minister for energy and climate change has not been met; in fact, quite the opposite since only a mere 132 people have committed to the scheme eight months after its commencement.
The green deal promotes energy-saving measures that are intended to protect the environment by helping meet carbon emissions targets and to save on winter fuel bills. The scheme allows people to borrow money to install double glazing, draft proofing, renewable energy technologies (such as solar panels), insulation and more efficient boilers. The idea is that the knock-on effect of these works will allow people to save money on their energy bills, which ultimately should exceed the cost of repayments.
A total of around 58,000 assessments were carried out, but only 1% of the homes assessed actually signed up to the green deal. “The fact that over 99% of people who had a green deal assessment didn’t want to take out a package should be a wake-up call for the government,” said Luciana Berger, the shadow minister for climate change. General opinion suggests that the £16 million (US$25.6 million) already spent (with a total £125 million (US$200 million) committed to it from the green investment bank) could be better used elsewhere, for example, by city councils directly.
Reasons for Failure
The reasons behind the green deal’s lack of success include high interest rates, penalty payments and hidden charges associated with this form of borrowing. The complications make taking out a regular bank loan almost a more viable option. Adding to these problems, the debt attached to the participating household means the house is likely to be more difficult to sell in the future. It is doubtful that prospective buyers would willingly take on a loan repayable at £50 (US$80) per month over a period of 10 to 15 years.
In addition, recent studies suggest that some energy-saving innovations could generate health risks during summer heat waves, particularly in London and other densely-populated areas. With global warming on the rise, this does not make for a positive outlook for the future. “Overheating is like the little boy at the back of the class waving his hand. It is forgotten about because the other challenges are so big,” said Professor Chris Goodier of Loughborough University’s department of civil and building engineering.
These drawbacks are not as predominant in other green investments, as often larger-scale projects will by represented by companies that could mitigate potential losses more easily than individual homeowners. One of the main drawbacks for the green investment bank is finding projects of sufficient scale in the energy efficiency field.
Large Infrastructure Projects
On a more positive note, the green investment bank appears to have had more success in relation to large infrastructure projects. Such projects that have been backed include a combined heat and power plant at Addenbrooke’s Hospital in Cambridge and a local authority-managed recycling center in Wakefield (West Yorkshire). Other investments include a total of £990 million (US$1.58 billion) in the conversion of the Drax power station to burn biomass.
London-based Sustainable Development Capital has launched an energy efficiency fund with £50 million (US$80 million) from the green investment bank (and £50 million from other investors) to finance the upgrade of an insulation factory in Holywell (North Wales).
According to the Confederation of British Industry (CBI), a quarter of businesses are not aware of the £3 billion (US$4.8 billion) green investment bank, and 41% of infrastructure providers believe the green investment bank to be ineffective. John Cridland, director general of the CBI, called the findings “alarming” and added that the government must hasten legislation to boost investment confidence.
A meeting is planned in Edinburgh on October 17 with approximately 20 influential people in international clean energy finance in an attempt to aid the bank’s development. The green investment bank’s director of operations, Rob Cormie, said, “Even after 12 months we are still learning how best we can address the market. The market we are in is relatively new, so it will be useful to talk to others from around the world about the lessons we have learned and the challenges we face”.