Any accredited Green Deal provider, whatever their size, will be able to become a member of the Green Deal Finance Company (GDFC) and offer cheap loans to customers looking to make improvements to their homes and businesses under the Government’s energy efficiency buildings programme.
"Membership is open to all and anyone who wants to become a member can," Paul Davies, a senior partner at PwC, which is coordinating the GDFC, told GreenWise. "Any accredited Green Deal provider will be able to join. SMEs that are wondering, 'should I get into this market or not; I don’t have a balance sheet so I can’t’ – that barrier has just been lifted."
Big players
The 16 founding members of the GDFC are mainly blue-chip companies and include names such as British Gas, Kingfisher, E.ON, EDF Energy, HSBC, Lloyds TSB and Goldman Sachs. However, Davies said the consortium wanted to operate a "very open book. Their stated objective is to be a finance enabler of the market, not a competitive barrier".
Davies claimed the GDFC would also help new entrants to the market. "We are an enabler and if you’ve got a high-end solution or marvellous new technological solution or a better kit, you’ll be better able to compete on price because underlying it is cheap finance to make it happen," he said.
Cheap loans
The GDFC is being set up to overcome the financing challenge of the Green Deal, the Government’s flagship measure to cut energy bills and carbon emissions from Britain’s homes and businesses. The Green Deal will enable homeowners and businesses to access loans for loft and cavity wall insulation, lagging and other energy efficiency measures. The Government says it will see billions of pounds lent every year and create 250,000 jobs between now and 2020. However, a rule of the scheme is that the loan repayments must never exceed the savings on the energy bills and companies and banks have been concerned they would not be able to offer cheap enough loans to make the scheme viable.
Davies said the GDFC gets around this problem because it will be big enough to access the capital markets and credit-worthy enough to borrow money at low interest rates, which it can then pass onto the borrower. "We need billions [of pounds of investment] in a year and that is beyond the capacity of even the biggest companies," he said. "[The GDFC] can quickly and regularly access the bond market and get high 'investment grade’ money". The company’s not for profit status also means it can reduce its capital costs, said Davies.
The Government is launching the Green Deal in autumn 2012 and Davies said the GDFC would be open for business in time for the launch.
Source: Greenwisebusiness.co.uk
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