Fund microrenewables using property sales, says REA

Frustrated by the low take up of microrenewables under the government’s grant scheme, the Renewable Energy Association is proposing that installations be financed using deferred loans linked to property sales.

Microrenewables should be financed with loans that can be repaid when householders sell their properties, the Renewable Energy Association says.

The renewables trade body issued a discussion paper on the proposal in February1 that has been presented to the Business Department (BERR), Environment Department (DEFRA) and Communities Department (DCLG). According to the paper, councils should lend households up to £10,000 for the installation, the loan secured on the property. The interest would be paid by councils or energy suppliers through the Carbon Emissions Reduction Target (CERT), which requires energy suppliers to cut their customers’ CO2 emissions (ENDS Report 397, p 45 ).

The REA developed its proposal following frustration about the low rate of take-up of microrenewable grant schemes like the government’s Low Carbon Buildings Programme. Only 4,120 grants have been paid out under the LCBP since it launched in May 2006 (ENDS Report 397, p 7 ).

In February, energy minister Malcolm Wicks said BERR is reconsidering feed-in tariffs for microrenewables as part of its planned renewable energy strategy, a point also made in March’s Budget. But the REA’s head of on-site renewables Andrew Cooper said feed-in tariffs would not support heat-only technologies or overcome the high capital costs of microrenewables. A 2kW solar PV system, for example, costs an average of £10,000.

"The high capital cost of microrenewables is limiting installations at the moment," Mr Cooper said. "We would welcome feed-in tariffs, but we think they would work better with these loans."

The REA has looked at "soft-loan" schemes to promote microrenewables - where householders are offered low rates of interest - but says these have not been effective. Chichester District Council has offered residents an interest-free loan for microrenewables but received only eight applications in a 10-month trial. A similar scheme by Kirklees Metropolitan Council for solar water heaters led to only 130 installations over three years. A scheme operated by Centrica has "had a similarly disappointing impact," the discussion paper says.

Mr Cooper says the REA’s proposal, the RE-Charge, should have a neutral financial impact on householders as the charge will "be offset by the increased value of the property gained through the installation". The REA has no evidence to support this claim. The scheme would cost £1 billion per year for seven years, leading to 1.5 million installations. After seven years, it should be self-financing as the money for loans can be reused once a property is sold. The scheme could be financed through the European Investment Bank, which has made renewable energy a priority for 2007-09.

Mr Cooper admits there are several unanswered questions surrounding the proposal, such as what happens if householders do not move every seven years as currently assumed.

Kirklees council, where Mr Cooper is a councillor, will run a two-year trial from April that has an optional third year and a budget of £5 million.

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