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The government wants to help you save money and save the planet at the same time. So what's the catch?

The government has just announced plans that could make it cheaper and easier for homeowners to pay for energy-saving measures.

Energy secretary Ed Miliband aims to slash carbon emissions from UK homes by 29% over the next ten years. And to help hit this target, he’s announced a package of measures to make Britain’s homes ‘greener and warmer’.

Here, I’m going to look at one of main parts of the scheme, and find out whether it really could help you save money and the planet at the same time.

What is the PAYS scheme?

A major element of the package announced will be a Pay As You Save (PAYS) scheme, providing ‘green home loans’. These loans will fund energy-saving measures like loft insulation and the installation of solar panels.

The interesting bit is the proposed repayment structure: homeowners taking out these loans will be allowed to pay them back over a period of up to 25 years, using the savings they’ve made on their energy bills.

Consumers will apply for these loans (of up to £10,000) though their local authorities, supermarkets and DIY chains. Major retailers and energy providers may decide to offer complete home insulation packages, as well as individual energy-saving measures - like the installation of a smart meter.

What if you move house?

Nowadays, very few people live in the same home all their adult lives. And people moving house a few years after taking out one of these loans may not have long enough to recoup the cost in energy savings and pay it back.

To avoid this problem, the plans propose that each loan will be linked a particular home, rather than to a particular person.

Because of this, people moving into a new home would need to consider the green repayments that come with it, as well as the energy-efficient measures that have already been installed. 

What are the benefits?

The main benefit of the proposed PAYS scheme is that many homeowners would be able to avoid the large upfront costs associated with energy-efficient home improvements.

At the moment, major energy-saving measures - like large-scale insulation or solar panel installation - can end up costing hundreds or even thousands of pounds.

The government is also keen to stress the employment benefits associated with its proposed package: it claims its new ‘green strategy’ will create 65,000 jobs in the green home industry. 

How much could you save?

In theory, homeowners taking out PAYS loans wouldn’t be worse off on a day-to-day basis, because the energy savings made would be at least equal to the repayments they were making.

Of course, individual savings would depend entirely on the work you had done. For example, according to the Energy Saving Trust, the installation of decent loft insulation alone could save you around £150 per year.

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Are there any downsides?

As part of the wider ‘green strategy’ package, the Department of Energy & Climate Change (DECC) does say it will “direct help to those that need it most”, with energy companies targeting work towards lower income groups.

However, there is criticism that the PAYS scheme itself will only help homeowners in a financial position to repay the loans. For many people in fuel poverty, their first priority is cutting back their energy costs immediately.

And it’s still unclear how PAYS loans would help people in the private-rented sector, whose landlords have no incentive to improve the energy efficiency of the buildings they let.

Where can you get one?

PAYS loans have already been piloted in around 500 homes in London, Birmingham, Sunderland and Stroud. However, it seems it will be a few years before these green loans will be coming to properties near you.

Earlier today, a DECC spokesperson told me that the PAYS scheme needs legislation before it can be introduced, so the details of how to apply aren’t yet available. However, the idea is to “encourage implementation of PAYS from 2012”.

Of course, there’s the small matter of a general election before then - so PAYS may never get the point of implementation.

What do you think? Does PAYS sound like a good idea? Would you consider taking out a green home loan? Leave a comment here and let us know.

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