The company behind the government’s Green Deal energy efficiency loan scheme is poised to start issuing finance packages once again.
The Green Deal Finance Company (GDFC) was acquired in January by Greenstone Finance Limited and Aurium Capital Markets in a £40m deal, after the government withdrew financial support for the loan scheme in the summer of 2015.
The deal saw the investors’ purchase GDFC’s existing loan book and administrative system, paving the way for a relaunch of the Green Deal.
The company is now expected to re-start originating new loans in the coming weeks, working with a handful of approved installers to offer households new boilers and energy efficiency upgrades at no upfront costs. Customers taking out Green Deal packages will then be able to payback the unsecured loans through their energy bill.
Speaking to BusinessGreen, Kilian Pender, the new chief executive of GDFC, said the company was planning to initially re-launch the service with a small number of installers before expanding its reach.
“The reason we want to go with a small number at first is we want to make sure we get the product right and get the customer journey right,” he said, adding that all the installers the company works with will be vigorously vetted to ensure they can deliver high quality work for customers.
“Last time round, the previous management team had a huge amount of pressure to get things done,” he said. “We don’t have that pressure. We want to originate loans, but we’d rather get the product right, invest in our technology, invest in our brand, so we have a more compelling proposition before we hit the market aggressively.”
The company is planning to initially work with eight installers with a view to having 15 to 20 partners on board by the end of the year.
“Next year, once we’ve made some investment in the brand and technology and really understand the customer journey at the level of the customer, at that point we will look at a wider roll out,” added Pender.
He also pushed back against criticism of the original version of the Green Deal, which saw critics claim the rate of interest on its loans was too high.
“The headline interest rate we are charging is actually pretty competitive compared to comparable products,” he said. “If you look at comparable products, say you wanted to get an unsecured loan, those guys will typically charge you rates in the teens. We are going to charge rates around nine to 10 per cent, maybe touching 11 per cent – that’s the focus. We think that is pretty attractive.”
He added that the scheme would also allow people who would otherwise use pay day loan companies to finance the replacement of broken boilers to access much more affordable credit to pay for essential upgrades.
The company is also planning to expand the range of technologies it can finance to allow households to install a variety of clean technologies at no upfront cost.
“The Green Deal will be the first product we offer, but at some point next year we may offer a different kind of product,” Pender said. “The way we see it is transformational changes are happening in the UK energy market. Nothing really happened in energy for a really long time, then suddenly you have the growth of solar, you have battery storage, you have home heating controls, you have smart meters, you have huge amounts of these growth products which customers are interested in. The challenge for both customers and manufacturers is getting those products installed… What we can do over time is build up this great network of qualified, vetted installers who we can trust and who consumers can trust.
He added that the company would look to provide a ‘one-stop-shop’ for households. “What we can say to customers is, ‘you can have a nicer, better, warmer home to live in if we can help you with a packaged offering’,” he said. “‘Rather than just doing the boiler, rather than just doing insulation, can we help you with some solar. And if you have solar you could take advantage of some battery storage’.”
Pender revealed the GDFC is working with MSC Saatchi on plans to rebrand the company and is confident it is targeting a multi-billion market opportunity.
“We think the boiler market in the UK is about a £5bn market,” he said. “We think smart meters are probably £1bn. We think heating controls is £500m. If you add all that up we think the market today is about a £7bn to £8bn market and we think most of that stuff should or will be financed. We think when you add battery storage, when solar starts to get more interesting when solar costs come down and energy costs go up, we think in a few years that could be something like a £1bn annual market.”