Matthew Bush, Metropolitan Housing Partnership’s Sustainability Manager, asks the £1billion question.

The government has announced plans for its £90 million ‘Green Deal’, a loan scheme that will fund energy efficiency retrofit works to homes in order to cut energy bills and achieve the challenging carbon reduction targets set out in the Climate Change Act.

Under the Green Deal it is intended that high street shops, local authorities and energy companies will fund energy efficiency retrofit works to the tune of up to £6,500 per home. Households will then repay the amount over time from the savings on their energy bills (previously known as Pay-As-You-Save).

The government is not just seeking a small improvement in the energy efficiency of our homes, but must stimulate a radical shift in ambition towards zero carbon in all our homes by 2050, to achieve the legally binding targets set out in the Climate Change Act.

Here at Metropolitan Housing Partnership (MHP) we are familiar with the challenges of achieving even basic improvements to large swathes of our stock. We will achieve our Decent Homes targets this year, we lead the sector with our approach to large scale estate regeneration and were recent winners of the 24housing Retrofit Best Practice Award 2010 for our ‘whole house’ package of works that is halving carbon emissions on Victorian street properties in the London Borough of Haringey.

We know how to do it, but the biggest single barrier is financing this kind of work on an even broader scale. The kind of energy efficiency works, beyond simple loft insulation, that needs to be done is both expensive and very disruptive to occupants.

For MHP, we conservatively estimate that the average cost of zero carbon retrofit would be in excess of £30,000 per home, equating to a total cost of approximately £1bn. That means finding £25 million per year, every year, for the next 40 years. Even in a boom period this would be laughably optimistic. In these austere times, with very limited prospects of public grant and no rent flexibility, MHP knows it is crucial to take advantage of new funding initiatives. We recognise it is important not only to help achieve the government’s ambitious targets, but also to support our residents in the face of future energy insecurity and continued energy price rises.

The Green Deal is a step in the right direction, but it’s not the real deal. It is well short of the estimated costs of works required for many property types, and £6,500 per home will not be enough to complete work on our properties. Furthermore and perhaps most importantly, we are yet to see the evidence that proves the marginal savings of low-income households are enough to fund repayments on the Green Deal loan. The government estimates the Green Deal could save £550 each year for the most energy inefficient homes. We know that some of our residents don’t even spend that much per year on energy.

So whilst we cautiously welcome this first step and the government’s commitment to the energy challenge, we urge the government to continue to talk with the social housing sector to explore and develop new funding mechanisms that will help us to achieve these ambitions, embed the green agenda into the economic recovery and protect even the most fuel poor and vulnerable in our communities.