1. Energy Saving Trust: Delivering the Green Deal Ben Frier – Local Delivery Manager

2. What are we trying to finance? 28 August, 20152 Return on investment over 25 year period with householder as the investor investing their own money Returns for energy efficiency Loft ~45% Cavity wall ~30% Solid wall, internal; 4-9% Solid wall, external; 0-3% Returns for solar PV FIT 6-8% index linked Previously proposed returns for RHI 6% solar thermal 12% other Whole house 5-7%

3. Role of Local Authorities 28 August, 20153 Aligned Incentives De-risking Jobs Fuel Poverty CO 2 reduction targets Landfill reduction Own estate contracts Social housing Marketing support Planning Waste contracts Convening power Project initiation Procurement Local initiatives (LEPs etc) Community leadership Project pipeline Scale Local Authority Revenue accounts Grants – UK and EU Prudential borrowing Credit enhancements Finance provision

4. LA Green Deal options Leave to central government and the market In houseWork with private sector Provide marketing support Outsource finance and delivery In-house model Partnership with private sector (finance/ delivery) Marketing/ Facilitation role Retrofit Guarantee Fund Public Private finance model Public Sector model Concept Going live Minimalist Carbon proactive

5. 1. Leave it to the Market: Market view on financing the GD Energy suppliers and retail firms don’t want to finance the Green Deal off their balance sheets Balance sheets committed to other programmes High cost of capital of 8-10% Challenge of providing for fixed rates for 25 years Confidence needed in achieving scale in order to recover start up costs Confidence in delivery to existing consumer base The Green Deal is not well suited for retail banks and mortgage lenders Long term fixed rate finance not attractive High system start up costs 28 August, 20155

6. The Green Deal Finance Company Green Deal Provider 1. Measures delivered to property 2. Fund pays GDP 3. Pays fund over upto 25 years GIB Banks £? Key Issues: Finance Will it be at scale? Will GIB finance? Will banks provide? What will be the cost of capital? Green Deal Providers What restrictions from banks? Access to ECO? What obligations to local jobs? What obligation to long term service? Householders What credit risk restrictions? Measures restrictions No solar PV or RH Operations Who will pay for set up? Who will operate? Refinance programme PWC Banks Energy Companies Building firms

7. General promotion of the Green Deal market 28 August, 20157 Finance vehicle(s) GDP 1GDP 2GDP 3GDP 4 etc TGDFC Framework of approved GD providers which could be run by anchor authority or County for all District/ Boroughs Local authority broad marketing

8. General promotion of the GD market (2) Finance vehicle(s) GDP 1GDP 2GDP 3GDP 4 etc TGDFC A variation in the model has authorities choosing a preferred Green Deal Provider for its area Borough 1 Borough 3 Borough 4 Borough 6 Borough 7 Borough 5 Borough 2

9. Leave it to the market: General promoter 28 August, 20159 StrengthWeakness Need to be attractive areas in which GDPs will operate Does not take advantage of strong LA positioning No direct economic development opportunities or drivers for local jobs. Ability to attract ECO Dependency private sector providing necessary momentum with GDPs TGDFC or energy supplier/ retail led models Passive approach; carries no financial risk Limited funding needed and no procurement costs required

10. 2. LA as a marketer 28 August, 201510 Finance vehicle(s) GDP 1GDP 2GDP 3GDP 4 etc Marketing & Surveying Organisation Marketing for a panel of GDPs Referral fee TGDFC LA investment into own programme or third party vehicle

11. LA as marketer/facilitator 28 August, 201511 Strength Straight forward framework to implement Capital investment limited to start up costs Can be repeated and a number of local authorities could work in concert Low balance sheet issues Weakness Limited scope for broader outcomes Need to procure and agree finders fee Potential dispute with operators over identification of customers Potential for adverse publicity if approved providers are ineffective or if equipment does not perform Potential for GDPs to cherry pick Dependency Set up of TGDFC or other finance vehicle Strong GDP network

12. 3. LA as large scale Green Deal provider 28 August, 2015Presentation title insert here12 Anchor LA (+ partner LAs) Delivery partner Finance vehicle Marketing Delivery (via panel of installers) TGDFC LA/ Bank finance Refinance once track record in place

13. LA as Green Deal Provider 28 August, 201513 Strength Long-term financial risk taken by private financiers Delivery Partner responsible for making it work Potential to create jobs and local low carbon sector Smaller LAs can join Delivery in your area Weakness First loss risk High set-up costs (but can be recovered) Scale required to achieve critical mass to access capital markets. Issue of governance Bank fees if bank finance used Dependency Birmingham City Council procurement process Working with partner LAs

14. Examples 28 August, 201514 Birmingham Cabinet decision in April 2011 –Initial programme of 15,000 private and social houses valued at £100m –Option to extend to 60,000 houses and £400 million OJEU and PQQ issued in Sep 2011 22 West Midland local authorities in total on the contract Now covers non-domestic stock 11 other public sector organisations including housing associations and police/fire Valued at £275m with option to extend to £1.5b Newcastle Cabinet decision in July 2011 –Recognised need to work with neighbouring authorities to achieve scale –Open up to North East councils –Reverting in January for procurement decision Strong support from North East councils –4 committed in total –Financial and legal advisors procured –Project governance and procurement programme being established Back to Cabinet – 25 th Jan –Approval to start procurement of a delivery partner –Approve, in principle, use of LA finance

15. West Sussex multi-tier model Contract Delivery partner WSCC Domestic Public sector non- domestic Anchor authority Provide start up finance –Districts repay via joining fee or; –Householders repay via Green Deal payments Run procurement programme –Districts named as partners Manage future re-financing Districts and boroughs Contribute housing stock Asset-matched investment Finance

16. Managing Green Deal Options 28 August, 201516 LA as Green Deal provider LA as marketer LA as general promoter 20112012201320142015 Can start now Clarity on private sector capability Clarity on market delivery Option to consolidate around working model

17. What do you want? What will you put in? 28 August, 201517 Resource/Risk/ Control Outcomes General promotion LA as marketer LA as large scale GDP

18. EST LA support – to date Green Deal options appraisal and business case -Greater London Authority (on behalf of 33 London Boroughs) -Association of Greater Manchester Authorities (10 authorities) -Nottingham City Council Business case for a preferred Green Deal model -Birmingham City Council -Newcastle City Council -West Sussex County Council Capacity Building workshops -Sustainability West Midlands (33 authorities) Building an evidence base -Green Deal and FITs measures potential, ECO subsidy, economic impacts, CO2 saved -Used by LAs and Registered providers 28 August, 201518

19. Contact Ben Frier Local Delivery Manager 07961 271587 Ben.frier@est.org.uk Vicky East Green Finance Manager 0207 654 2477 vicky.east@est.org.uk