Non-domestic green deal has potential to create £800 million market in the UK, EY predicts

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London 23 October 2011: EY today publishes a new report ‘Making energy efficiency your business – understanding the potential of the non-domestic Green Deal’, which highlights the key policy issues facing the non-domestic Green Deal (NDGD) and the potential for incentivising energy efficiency in small and medium sized businesses.

Commissioned by British Gas Business, the report finds that the NDGD represents a good start to unlocking the energy efficiency and carbon reduction potential within small and medium sized businesses which have historically lagged behind in this area. As it is targeted at one of the most dynamic areas within the economy, its success could have a tangible impact on investment and growth.

EY estimates that a 10% take up in NDGD would equate to:

  • An annual market size for energy efficiency measures in small and medium business of up to £800 million by 2020; and
  • Around 5% of the carbon savings required from sectors not already included in the EU Emissions Trading Scheme to meet the UK’s 2020 targets.

Bill Easton, Director in EY Power & Utilities team, comments: “The Non-domestic Green Deal provides a significant opportunity both for the UK as a whole and for small and medium sized business, in terms of economic and environmental benefits. However, important challenges remain, particularly around whether the benefits of participation will be compelling and sufficient enough to overcome perceived risks surrounding effort and costs of participation and the reliability of the results.”

The report explores the merits of potential additional interventions in a number of areas, including supporting awareness campaigns and also measures that make the NDGD more attractive as a package. The success of this policy will depend on government adopting a consciously ‘business centric’ mindset in developing the necessary policy details. This requires an in-depth understanding of the pressures currently facing business and ensuring that policy in this area is reflective of these. For example, setting in place a clear process which requires minimum effort and resource from business.

This will help create a system which is reliable and trusted. Building such trust in the early stages will be critical. It will also be important to ensure an effective balance between the interests and incentives relevant to each of the customers, scheme providers and policymakers—essentially the appropriate allocation of the costs and risks of participation.

Bill Easton, EY Utilities Director, concludes: “The initial design represents a good start, although we believe that DECC needs to adopt a more business centric mindset in their forthcoming consultation in order to develop an approach that can capture the potential benefits. Failure to provide this clarity could reduce participation levels and undermine the chances of success.”