What is Pay As You Save?
If you generate your own renewable electricity by installing your own solar, wind, hydroelectric or anaerobic digestion microgeneration technology, you can get paid for every unit of electricity you generate, and sell any excess to the National Grid through the Feed-in Tariff.
However the upfront cost of installing these technologies can be a barrier to getting involved, which is where Pay As You Save comes in.
Pay As You Save schemes are a government initiative to provide a loan so that households can install renewable energy microgeneration technology with no upfront cost.
The loan repayments are spread over a 20-25 year period, so you can start to feel the benefit of being more energy efficient straight away, because the repayments will be lower than the amount you will save on your energy bills.
Without Pay As You Save, anyone wanting to install renewable energy technology has to pay the installation costs upfront or borrow the money. This means that these energy sources are only affordable to the affluent and that investing in microgeneration doesn't make financial sense for most people, especially anyone planning to move home within a few years.
How will Pay As You Save loans work?
Although the scheme is backed by the government, the loans will probably come from commercial organisations such as energy companies and banks. Businesses including British Gas and B&Q have expressed an interest in the scheme and were involved in pilot schemes across the country.
The interest rate on Pay As You Save loans is yet to be decided, but it's likely to be similar to mortgage rates.
The loans, which can be up to £15,000 per household, can be repaid over 20-25 years. If you move house in this period, the loan is taken over by the person that buys your house. You could find that having microgeneration system adds to the value of your home, despite the fact that the new owner will have to take over the loan.
A Pay As You Save loan can only be spent on certain renewable energy generation technologies, including solar, wind, hydroelectric and aerobic digestion.
How can I get involved in a Pay As You Save scheme?
The Pay As You Save scheme is still a concept, rather than reality. It has been trialled in about 500 homes in Birmingham, London Borough of Sutton, Sunderland, Stroud, Surrey and Sussex. The Department of Energy and Climate Change (DECC) has provided £4m of funding to cover the capital with £2m available in 2009/10 and the rest in 2010/11.
Legislation to put the scheme into effect on a wider scale is yet to go through Parliament.
More information about Pay As You Save