Overcoming the Upfront Investment Barrier — Comparing the German Co₂ Building Rehabilitation Programme and the British Green Deal

Abstract

This paper compares two flagship policies in the area of energy efficient building refurbishment, the German CO 2-Building Rehabilitation Programme and the Green Deal in the UK. Although both policies are essentially loan programmes to finance energy efficiency measures, the nature of the two policies is very different regarding scope, financial architecture, integration with other policies, and carbon reductions. The paper draws out the main differences of the programmes as well as similarities.

On‐Bill Financing Programs to Support Low‐Carbon Energy Technologies: An Agent‐Oriented Assessment

“…It assumed that high upfront costs, paired with long repayment periods, and split landlord–tenant incentives were the major problems (DECC, ) . According to a Department for Energy and Climate Change (DECC) representative, the Green Deal was partly triggered by the report prepared by the Green Buildings Council (UK‐GBC, ), while the previous government had launched a pilot program that ran from November 2009 to July 2011 (Rosenow, Eyre, Rohde, & Bürger, ) . Based on the 2011 Energy Act, five Implementing Regulations were introduced that created the legislative framework.…”

“…For example, there was no provision that estimated energy cost savings had to exceed repayments. Under the pilot program, households were provided with up to £20,000 per property at a 0% interest rate (Rosenow et al, ).…”

Worth the risk? An evaluation of alternative finance mechanisms for residential retrofit

“…A handful studies have discussed the potential of alterative retrofit finance mechanisms, including potential revolving retrofit funds (Gouldson et al, 2015), the UK's Green Deal (Marchand et al, 2015;Rosenow and Eyre, 2016), and the successful German KfW programme (Rosenow et al, 2013a). Others have explored how energy performance contracts could finance residential retrofit (Winther and Gurigard, 2017) but have not foregrounded the financial component of such models.…”

“…Previous studies show that the interest rates on loans can limit the appeal of retrofit finance £0.00 £5,000.00 £10,000.00 £15,000.00 £20,000.00 £25,000.00 £30,000.00 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 0% 5% 10% Figure 2 The impact of the interest rate on borrowing potential, assuming a fixed repayment and term mechanisms such as the UK's Green Deal (Marchand et al, 2015;Rosenow and Eyre, 2016), whilst low interest rates were an important success factor in Germany's KfW scheme (Rosenow et al, 2013a;Schröder et al, 2011). This high cost of capital is also likely to significantly limit the feasible range of retrofit measures that can be funded (UKGBC, 2014).…”

“…Germany's state bank, the KfW, provides loans to households arranged through commercial banks. Funds are raised on capital markets 13 , and offered at very low rates of interest (>2%) (Rosenow et al, 2013a). The bank is able to offer these low rates primarily due to its AAA rating; a product of its public status, with additional state funding to further subsidise interest rates (Schröder et al, 2011).…”