Rates include £650 cashback for fitting solid wall insulation. Photograph: Alamy
Householders insulating their homes from January will be able to claim hundreds – and potentially thousands – of pounds back in cash from the government, the energy secretary, Ed Davey, said on Friday.
Under the scheme, the coalition's flagship environmental policy, householders take out a loan with a provider who undertakes work such as upgrading old boilers, lagging lofts and draught proofing. The loan repayments must be offset by the energy savings, under the scheme's so-called "golden rule", though there is no government guarantee underpinning it.
Davey said: "The green deal will provide unprecedented choice for consumers wanting to improve their homes and make them more energy efficient. This cash back offer will help get the green deal off to a flying start. It really is a great offer – the more work households have done, the more energy they stand to save and the more cash they receive."
The rates initially offered will only be available to the first thousands of households to give their homes an energy makeover, and will be reviewed once £40m is spent, which could be as quickly as "two or three months if it goes well," according to a Decc spokesman.
Rates include £650 cashback for fitting solid wall insulation, £150 for floor insulation and £50 for draught-proofing, and if enough works are undertaken, the cashback could add up to more than £1,000. However, the Decc spokesman said it was expected the average household would get around £350, meaning the rates could be cut after 114,285 households have undergone works.
The cashback will be capped at 50% of a householder's contribution, with the money paid by the company that undertakes the retrofitting. The loan is tied to the property, rather than the individual.
"The cashback will help get the green deal away. But the long-term success of the scheme will still depend on the interest rate [of the loans]," David Symons, director at WSP Environment & Energy, told the Guardian.
Shadow climate change minister Luciana Berger, said: "This is another hurried announcement from an out-of-touch government, making it up as they go along, desperate to divert attention from an energy policy which is in chaos.
"No amount of gimmicks and giveaways can distract from the fact that unless the green deal is a good deal and saves the public money, it will not be a success. Because of the high interest rates that consumers will have to pay on green deal finance, even with the energy secretary's announcement of a £1,000 discount, in many cases people will still have to pay more in interest payments than the upfront cost of the measures they take out under the green deal."
Audrey Gallacher, director of energy at Consumer Focus, said: "It's very welcome to see the government providing cash incentives to those who take up the green deal scheme early. It's also welcome that people don't have to take out green deal finance to qualify. But the government needs to provide incentives to all customers, not just early-adopters, to ensure wide-spread take-up in the long-term. This could mean moves such as council tax breaks or similar benefits for taking up energy efficiency measures."
The £125m cashback pot comes from a £200m Treasury fund announced last November, with the remaining £75m being spent largely on promotion via local authorities. A Decc spokesman said that, separately, the department is likely to use its own budget to spend on advertising, potentially online, but "not on a big TV campaign."