Market Forces and the UK's Green Deal

In 2012 the UK is launching the green deal, which will unleash the competitive forces in the energy efficiency market. The green deal will be the biggest home energy improvement programme of modern times. Due in part to the green deal the energy efficiency market in the UK could reach £800m by 2020.

Under the scheme nationwide brands, small local businesses and community organisations will compete to deliver the best offers. Competing not just on price but on quality and service. Insulation is one area where the green deal will generate new demand and increase jobs to an estimated 65,000 by 2015.

The green deal allows energy companies to offer improvements at no upfront cost and recoup payments through energy bills, but has to date been primarily targeted at the domestic sector, businesses will also need to be incorporated into the plan to maximize energy savings and minimize emissions reductions.

Non-domestic buildings account for 18 per cent of all UK CO2 emissions, about half of which comes from organisations not covered by existing emission reduction policies such as the Carbon Reduction Commitment (CRC) and the EU’s emissions trading scheme.

Bill Easton director of Ernst & Young’s power and utilities team, told BusinessGreen, “The ideal scenario is getting to a world where both those businesses choosing to participate and the energy companies doing this want to do it, like the NCAP safety ratings for cars,” he said. “If we had something similar around energy efficiency ratings, landlords and tenants could see some benefits for the brand.”

For the green deal to realise its full potential, Easton said, “We need some strong lead from government: a threat of something mandatory if there’s slow take-up.” However, a Department of Energy and Climate Change (DECC) spokesman ruled out mandatory requirements for ths scheme, saying the Green Deal would be “a market-led initiative that avoids overly bureaucratic Government intervention.”

Given the fact that 65 percent of UK businesses rent space, there needs to be a change to building regulations so that the leasing of properties is covered under the plan. It would also be benefitial to have targeted marketing promoting the benefits of the scheme.