Pay As You Save
‘Pay As You Save’ (PAYS) is a scheme for tackling emissions from existing homes that has been rising up the political agenda over the last few months and gathering support from politicians, industry, NGOs and academics. Its starting point is that householders don’t, typically, have a huge amount of money to spend on energy efficiency. And even if they did, they don’t think they’ll see the payback within a sensible timeframe.
To overcome this obstacle, under PAYS, households would be able to access up to £10,000 worth of low carbon measures at no upfront cost. The capital would be recouped through a form of standing charge on the property, but the householder would save more money through reduced energy bills than they would pay on the charge. PAYS would be offered by a range of properly accredited ‘Low Energy Refurbishment Providers’ – energy companies, tradesmen, retailers and local authorities.
So how would it work in practice? The proposition in the recent UK Green Building Council task group report is as follows:
- I decide to get some work done to my home that requires getting the builders in.
- The installer gives me a quote for the work and explains that I can use the PAYS scheme to install some energy efficiency measures or microgeneration technologies.
- The company talks me through the cost and how much I will save on my energy bills (on average) once the measures are installed. I can check these figures by contacting my local authority, the Energy Saving Trust or other trusted sources.
- When I’ve agreed the quote and decided to go ahead with the package of works, I also agree to a schedule for payments under the PAYS scheme. Once the energy efficiency measures have been installed, my local authority bills me for these repayments.
- If I decide to move house, the charge is ‘passed on’ to the new homeowner to continue the payments from the money they will save on their energy bills. The charge will expire after 25 years.
The report recommends that the initial capital, which could total up to £5bn a year, is sourced from the private sector. This capital would sit within a ‘3rd Party Finance Vehicle’, the installers would access this finance – up to £10,000 per household - and in turn offer the Pay As You Save proposition to the householder. Primary legislation would be required to enable the local authority to create the ‘local land charge’ via which the money is repaid. This would be attached to the property as a schedule of payments and would not appear on the title of the property at the Land Registry. Because of this and the fact the savings would be greater than the costs, the valuation of the property would not be negatively affected.
PAYS isn’t a panacea and would form part of a range of financing options. However, it does overcome most of the significant roadblocks encountered by other approaches and would be available to all. It would have to start off small and snowball into something much greater. But it could be our best chance to rise to this most urgent of challenges.
[This piece was adapted from an article in sustain’ magazine]
