Energy bill to introduce ’pay as you save’ scheme for commercial sector in major boost for refit market

The coalition government is set to extend a planned domestic green retrofitting scheme to cover up to 3 million business premises, in a move which could provide a huge boost for the £10bn commercial refit market.

Plans for a “pay as you save” scheme to persuade householders to install energy-saving measures in their homes were announced by the previous government in March this year and endorsed by the coalition under the “green deal” banner.

But energy minister Greg Barker has now decided to extend the scheme, which will be contained in this autumn’s Energy Security and Green Economy Bill, to offices and other commercial buildings.

John Alker, director of policy and communications at the UK Green Building Council, said he understood officials were now working “round the clock” to work out how to extend the scheme.

The “pay as you save” scheme pays the up-front cost of green upgrades, such as insulation or renewables, and then recoups the cost through the occupiers’ energy bills.

Because the scheme generates revenue, it is proposed institutional investors will fund it for a small return, with occupiers also saving money through reduced energy usage.

Alker said: “In June we were talking about pay as you save applying just to homes. Now if it’s not extended in the energy bill we’ll be severely disappointed.”

A spokesperson for the department for energy and climate change said 2.8m businesses could benefit from the scheme, which would be targeted initially at heating and lighting systems for smaller firms.

Chris Brown, chief executive of developer Igloo, said: “People haven’t realised how big this market is going to be. We’re talking about something the size of another housebuilding industry.”