Energy minister attacks big construction firms that are struggling to make the government’s flagship energy efficiency scheme work
Carillion and other firms struggling to build a business using the Green Deal “need to look at their business model”, energy minister Greg Barker has said.
His attack came as official figures revealed just 626 Green Deals are currently live, meaning the customer is paying back the loan through their energy bills, one year after the launch of the scheme.
Carillion has previously announced it will need to cut up to 1,000 jobs from its Energy Services business because of the slow up-take of the Green Deal.
In October, it said the restructuring would result in it incurring a financial hit of around £40m in 2013.
Barker said large construction firms were “in the driving seat - Carillion in particular” for the Green Deal and there was a need “to look at their business model and what investment that they have done”. He added: “We can’t go out and build their business for them.”
He said smaller firms were “going gang busters” doing work under the Green Deal and its sister scheme the Energy Companies Obligation.
He said it was “disruptive new entrants” to the energy efficiency sector that were “creating the market at scale”.
Barker, a former finance director in the City, added: “It’s the larger companies, the incumbents, that have been the slowest to adapt and make an opportunity of the new energy market.
“Maybe this [the Green Deal] is going to be the trigger for a big realignment for who can make a success in the energy world and who can’t.”
But he said the big six energy companies, which had been expected to be a driving force behind the scheme, had gotten off to a “very slow” and “disappointing” start.
“The big six have not delivered Green Deal measures to their customers in the way we expected, and were led to believe, when we were planning the Green Deal,” he said.
Speaking to Building, Philip Arend, Carillion Energy Services’ strategic liaison executive, said the policy environment created by government was making business planning in the energy efficiency sector harder, not easier.
He said: “We want some form of assurances to invest and have confidence in government policies but at the moment there are more unanswered questions than answered ones.”
He pointed to the announcement of cuts to ECO in the autumn statement last December as an example. “What we desperately need is clarification of how it is going to look, we desperately need to know what this consultation [one the changes] looks like because at the moment it’s in a vacuum. We are not expecting the legislation to come about until October and that’s a difficult period in which to make your business model adjust,” he said.
Relaxing the Golden Rule?
Barker said the government was considering relaxing the scheme’s golden rule, which states the cost of the measures and finance must not exceed the savings on the consumer’s energy bills, to make it more attractive.
He said feedback from industry had told him many consumer were willing to accept a higher repayment, possibly increasing their bills slightly, if it meant the Green Deal loan was paid off faster.
The minister said: “It [relaxing the golden rule] is being considered but there is a problem here about what you then pass on. The golden rule is there so you can fairly leave a debt with the meter to pass on to the next owner.”
He said it would be unfair to pass on higher energy bills to the next occupier of the house.
Barker added: “One of the options might be that people could exceed the golden rule but if they move it might trigger repayment.”