British households will be able to take out soft loans to improve the efficiency of their homes under a proposed new law to fight climate change and cut fuel poverty, the government said on Tuesday
The aim is to overcome the high upfront cost of home refurbishments, for example to insulate lofts, thicken walls and install draught-proof windows, by allowing people to take out long-term loans at subsidised interest rates.
The cash-strapped British government hopes high demand will entice private sector lenders including banks, energy companies and low-carbon technology installers to supply loans at low rates of interest.
The plan depends on new legislation to tie new loans to a house rather than a person, allowing residents to move house independently of whether they have re-paid the debt or not.
"By spreading the repayments over a much longer period - more like 25 years than the eight years that someone might want to live in a house - that's what makes it financially affordable," Energy and Climate Secretary Ed Miliband told Reuters.
"The key thing that we're doing is to put the proposed legislation forward to ensure that the repayments are attached to the house not the person."
Financing could not therefore be arranged until after legislation in the next parliament, assuming the government won a forthcoming election expected in the next two months, he said.
Miliband could not confirm how much he expected lenders to make available.
"It will be for the private sector to come forward and offer the financing, and I think there will be a large market in this, that people will want to come forward."
Local governments would make sure that interest rates were set at levels that households could repay their loan from resulting energy savings, said Marian Spain, director of strategy at the Energy Saving Trust, which advises the government.
"Some of the schemes will be subsidised by the local authority," she added.
Emissions
The 'Warm homes, greener homes'initiative aims to cut carbon emissions from homes by 29% by 2020. Around a quarter of British emissions come from the energy used in homes.
A lack of clarity over just how much finance would be available disappointed campaigners.
"It's not good enough to depend on the market to deliver low-cost finance. You need a green bank to allow whole-house retrofits, rather than just incremental improvements," said Ed Matthew, who leads energy efficiency at climate think-tank E3G.
The government announced two other changes - allowing local government to force energy companies to invest in energy savings, a previously centralised obligation, and new rental property standards forcing owners to invest in efficiency.
The strategy would fit alongside the existing Carbon Emissions Reduction Target, now in its third, three-year phase from 2008-2011 expected to drive private energy company investment of around 2.8 billion pounds (3.1 billion euros) in home efficiency improvements.
The new strategy aimed to offer up to seven million "eco-upgrades" by 2020, compared with 26 million homes in Britain in total.
Britain has previously announced plans to install smart meters - which allow residents to view energy use in real time - across all homes by 2020, and for all new homes to be "zero carbon" from 2016.