The Government has committed to significant carbon emissions reductions over the next few decades with a view of the country being carbon neutral by 2050 with a target of a massive 78% reduction compared to 1990 levels by 2035. As part of the Government’s plans to ensure that these targets are met they have generated the Net Zero Innovation portfolio which is a program of funding for low-carbon technologies and systems with the aim of reducing the cost of decarbonisation and makes achieving the targets more likely. One of the aspects to the Net Zero Innovation portfolio is the Green Home Finance Accelerator and we will take a look at this in the little more detail in this article.
One point that is a potential stumbling block for households is the cost of low-carbon technologies such as heat pumps, but even insulation, for example, can be quite expensive with relatively low financial paybacks and this makes these upgrades, understandably, somewhat unattractive to homeowners.
According to Government figures just over 1% of UK homes have the lowest EPC rating of G and a whopping 59% of all properties with an EPC rating were a D or lower. Given the Government’s plans to tighten up on EPC ratings in all areas: They are looking at having as many homes in general at an EPC of C or better by 2035. In the private rented sector the current plan is to have a grade C EPC between 2025 and 2030 dependant on the tenancy and for non-domestic rented properties to be at an EPC rating of B or better by 2030, it is clear then, that low-carbon improvements need to be more affordable.
The Green Home Finance Accelerator scheme is designed to move the financial markets in that direction.
What is the Green Home Finance accelerator?
This scheme will provide £20 million in grant funding to financial institutions to support the design, development and piloting of a range of financial products which will encourage domestic energy efficiency through the retro-fitting in properties of low carbon technologies. The program is aimed at improving partnerships between lenders, investors and low carbon heating and property value chains which will give homeowners more end-to-end services.
The scheme will run across 2 stages. Stage 1 is the discovery phase which will take up to 6 months. Applications for this opened up on the 18th of October 2022 and will close on the 14th December 2022. Grants will then be awarded in March 2023 for around 20 projects. The Government has written some detailed guidance on the process to help financial institutions, but it is clear that they are looking for innovative financial offerings to help the green revolution in homes.
Between March 2023 and September 2023 those awarded grants will spend time acquiring the skills and knowledge to develop these new financial products and to develop the product which will need to show a genuine market need, have good consumer appeal and that the product will overcome consumer barriers to acceptance.
At the end of this phase any financial institutions wishing to progress will need to make an application for funding to take their product to the pilot stage which will last up to 15 months. In the pilot stage the products that were generated in the discovery phase will be piloted by the financial bodies out in the market. The program is due to end in March 2025 and the hope is that there will be a suite of financial products which have been shown to improve consumer action as far as decarbonising their homes is concerned.
Although a few years away, these new products could certainly make it easier for homeowners to upgrade their properties and especially when it comes to the rental sector, these products will help landlords make the upgrades they need to ensure that their rental property meets the EPC rating criteria that will be introduced.
