Financing the Green Deal

The Green Deal Finance Company

The Green Deal is going to be mainly financed by the private sector through a Green Deal Finance Company or GDFC as the Department of Energy and Climate Change (DECC) like to call it, the Government does  love an acronym.

So where is all this money going to come from?  Well big banks and investment firms like Goldman Sachs and Price Water House Cooper have signed up to be suppliers of the financial vehicle that will carry all the financial apparatus to keep the Green Deal afloat.  Some figures that have already been released are:  The Government is going to try and incentivise us all with £200 million in the first year, the private sector is going to supply an additional £14 Billion worth of finance to the scheme.

The Government thinks that by opening the financing to the banks will ensure better rates of lending and create competition within the sector, allowing loans to be lent at low rates of return. Observers have expressed concern that the loans need to be well below current market rates if the scheme is to succeed.

‘Green Investment’ is a growing industry with huge potential for larger investment funds and pension managers to invest in so it’s unsurprising to see such large institutions at the head of GDFC. The money markets will be where the banks are going to find the huge sums that are needed to fund the Green Deal but as we all know these markets are not so easily accessed in recent years so it will be interesting to see what rates the GDFC can get.

The Government has set a target of raising £500 million pounds in the first year through the GDFC. This then needs to trickle down through assessors, providers and installers to the end user you and me and we start paying the loans back through our energy bills. It’s a big plan and there are going to be some long numbers involved but if the GDFC can work things out and not fall at the first hurdle then maybe the model can be adapted as the Green Deal evolves. As the time old saying goes, watch this space…

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