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Subject to parliamentary approval, the Smart Export Guarantee (SEG) will pass into law this week. It will guarantee that people installing new solar panels at their home or business will receive a payment for exporting electricity to the grid from the start of next year.
Energy suppliers with over 150,000 customers will be obliged to offer an export tariff to small-scale electricity generators (homes and small businesses) for each unit of electricity they sell to the grid, as measured by their smart meter.
This is a programme for new generators of clean energy: the Smart Export Guarantee doesn’t apply to those benefitting from the earlier Feed-in Tariff scheme. Energy suppliers will have to have their SEG tariffs in place at the latest by the end of this year.
Small-scale electricity generators who will be able to benefit from the SEG include householders and small businesses who have solar photovoltaic (PV) panels or wind turbines, hydroelectric and anaerobic systems of up to 5MW capacity and micro combined heat and power up to 50kW.
To date, solar PV has been the massively dominant technology in this list, now fitted to over 7m UK homes. The Feed-in tariff (FiT) scheme closed to new applicants at the end of March 2019, and since then the rate of solar PV installations has tumbled by 94%. Ensuring a payment for any excess electricity generated from new installations may go some way to address that slide.
Energy suppliers with more than 150,000 customers must offer a minimum of one export tariff each. The tariffs will probably be relatively straightforward initially but as the technology develops, we may see more complex tariffs designed to motivate small-scale generators to store electricity and sell it into the grid at different rates depending on the relative level of demand.
In future, the Smart Export Guarantee may reward people who just store, rather than generate electricity. While import, storage and re-export isn’t financially viable at small scale given current tariffs and technology costs, It looks like the legislation will be fairly flexible and allow energy suppliers to pay people for exporting electricity to the grid at times of peak demand, that they have imported earlier – whether it was renewably generated or not.
There won’t be a minimum rate for the tariff. The legislation only says that the payment should be ‘more than zero’. The indications from early export guarantee type tariffs currently available is that a payment of around 5.5p per kilowatt hour may be on offer. The government does say that it will intervene should energy suppliers not provide sufficiently competitive tariffs.
Energy suppliers will pay for electricity exported to the grid based on readings taken from a registered smart meter. This underlines once again, the importance of the smart meter roll out programme. Meters must be capable of providing export readings every half an hour, even if the tariff is not paid on a half hourly basis. For small scale generators without a smart meter, it may be that some energy suppliers will allow for manual meter readings of the cumulative amount of power exported on a monthly basis but, clearly, a wider range of tariffs are going to be available for those who do have smart meters.
Ofgem will report on the uptake of the range, type and uptake of Smart Export Guarantee tariffs. This will help to show whether the SEG is managing to deliver on its aim to deliver competitive and innovative tariffs.
To qualify for the SEG, small scale generators will have to have renewable energy systems installed to meet the standards of the Microgeneration Certification Scheme (MCS). Payment of the smart export guarantee SEG will not be linked to or affected by any other grants or loans, with the exception of the feed-in tariff. It will not be open to householders currently receiving feed-in tariff payments, although you will be able to swap from the feed-in tariff to the smart export guarantee should you wish to do so.
With storage technology evolving rapidly, it may be possible to use storage capabilities to generate a level of income using the SEG in the future
The Energy Saving Trust welcomes the introduction of the Smart Export Guarantee, and we’re pleased that some energy suppliers are already moving to offer SEG-type tariffs. However, our analysis of these early offerings in the marketplace shows that the SEG may not be sufficient to make solar PV an attractive financial option for many households. That’s a big change from the FiT, which enabled over 7m homeowners to fit solar panels. So while we’re excited to see how the SEG market develops, we’d still like to see additional support to help homeowners take advantage of clean energy generating technology.