UK: New Regulations Under The Energy Act 2011 May Never Happen

Last Updated: 16 November 2011
Article by Jennifer Chappell

In the wake of the Energy Act 2011 being given Royal Assent last month, Jennifer Chappell, associate at law firm Bircham Dyson Bell, believes that legislation within it to govern the energy efficiency of properties will never meet the 2016 and 2018 deadlines.

"I'm very sceptical about this latest legislation - for a start, will the consumer actually take up the product? Who will be regulating the Green Deal assessors and Green Deal providers, and how will it actually work in practice?" asks Jennifer Chappell.

The Energy Act is made up of provisions implementing the "Green Deal" which was launched by the DECC in September 2010. The Green Deal is essentially a framework to enable private firms to offer consumers energy efficiency improvements to their homes, community spaces and businesses, at no upfront cost. The payments will be recouped through a charge in instalments on their energy bills.

It seems that a property will need be assessed by an authorised Green Deal assessor who will decide whether it qualifies for what may be a significant cash loan to carry out energy saving improvements to the property. There is still a large amount of detail that needs to be fleshed out in regulations and the success of the scheme will depend upon how financially attractive the terms are.

For the individual householder, a cash loan would be offered and a modest rate of interest charged on the loan. The capital sum would need to be paid back over a period of years through a supplement on the normal energy bill. The idea is to make homes warmer and cheaper to run in the wake of ever increasing gas and electricity bills. The Government will be subsidising the general public with an upfront loan which allows the individual to start saving energy and carbon immediately.

Questions have been raised as to how the Government ensures the improvement works carried out on properties will actually be of such a quality to be effective. Critics have voiced concerns and doubts over whether the Green Deal can actually be made to work. There will need to be a detailed system of checks, guarantees and insurance available for the consumer to be confident in the energy saving products and services provided.

The Government intends to predominantly target the rental sector. Regulations must be made by April 2016 preventing domestic landlords from unreasonably refusing a request from a tenant to enter into the Green Deal plan. Landlords and sellers of domestic properties will have to disclose that their property is participating in a Green Deal plan and on any future sale or letting, the prospective purchaser or tenant will be required to recognise that they are bound by the scheme.

In relation to both domestic and non-domestic properties, the Act requires landlords by April 2018 to achieve and maintain a level of energy efficiency as set out in its energy performance certificate. If the level of efficiency falls below the specified level, the property cannot be let until improvement work has been carried out.

"It's all part of the Government's desire to be the greenest Government ever, but I just don't see how people will be incentivised to take up the scheme if interest rates on loans are unattractive. I'm not sure how a sufficient level of repayment can be met through energy bill savings and how the lenders can be reliably paid back over a number of years" explains Jennifer.

"I also fail to see how allowing commercial properties to stand empty due to having fallen short of their energy performance will help our economy or the landlords - or even the businesses that want to rent space."

"Its definitely the way forward to make property more energy efficient and landlords more accountable, but I'm not sure this is the right way to do it. It seems to be a very complicated piece of legislation which needs alot of secondary legislation within a tight timescale. I don't know how it will work in practice and I'm not convinced it will ever come to fruition."

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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