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March 2019 saw the government-backed Feed-in Tariff close its doors to new customers. In its wake, a void. The market held its breath, waiting to see what if anything would replace it. Given the government’s commitment to a zero net-carbon energy production by 2050, something needed to be put in place to encourage homeowners and small businesses to invest in renewable energy production. Otherwise, small scale solar generation outfits (i.e. domestic and small business) would be in a position where they were not being paid for the excess electricity they generated and exported to the grid.

To plug this gap, in June, the government laid down legislation for the Smart Export Guarantee (SEG). This legislation requires electricity companies with 150,000 customers or more, to provide an export tariff. The rate at which customers will be paid for their exports has not been set, instead, the legislation stipulates it ‘must be above zero’. Although it will be 31st December until the legislation comes into effect, anyone installing solar panels prior to that will still be eligible to join the scheme. The tariff will be paid per unit of electricity (kilowatt-hour) exported to the grid, a figure determined by a smart meter.

There is speculation the SEG will be offered in a range of tariffs to take into account energy generators with battery storage systems. In these cases, there may well be a higher rate payable for export of electricity during periods of greater demand. Additionally, there may be different rates depending on whether the energy exported has been generated by ‘green’ methods’ or whether the electricity has been drawn down from the grid at lower rate times, stored, and then exported back to the grid during peak times. As some energy supplied by the grid is derived from fossil fuels, this type of energy is known as ‘brown’ energy. However, it may be that electricity companies will require the smart meter to be capable of distinguishing between ‘green’ and ‘brown’ energy and pay differing rates accordingly.

This is welcome news for the renewables sector as it gives small scale generators more incentive to take the leap and have a solar panel system installed, particularly when incorporating the storage option. With solar panels now 50% cheaper than in 2011, the investment is significantly more attractive than ever before. However, with VAT due to be raised from 5% to 20% on solar (and some other methods of renewable energy materials), a move stipulated by EU Law, the introduction of the SEG delivers a much-needed boost for the sector. Furthermore, by moving away from the subsidy model of the FiT to a marketised model may well encourage electricity suppliers to offer increasingly favourable rates for SEG to encourage their customers to remain with them, rather than switching to a rival with a more competitive rate. With this model, SEG rates may outstrip many FiT rates.

Key Points:

    • SEG will apply to solar PV systems, wind turbines, hydroelectric and anaerobic systems of up to 5-megawatt (MW) capacity
    • SEG will also apply to micro combined heat and power (mCHP) of up to 50kW
    • To qualify for SEG, the system must be installed by Microgeneration Certification Scheme (MCS) certified installer
    • Smart meter required preferably one that gives half-hourly readings to access a wider range of tariffs
    • Some electricity companies may allow for a monthly manual meter reading of cumulative use however this is unlikely to be as favourable as tariffs for those with smart meters capable of half-hourly readings
    • SEG rates are considered likely to be set between 5p/kWh and 6p/kWh, at least initially
    • SEG will not be compatible with the export part of the FiT
    • Customers will be able to switch from FiT to SEG if they calculate it will be more profitable for them
    • Octopus and Bulb are already offering an export rate for those who missed the FiT deadline

If you’d like to find out more about solar panels and battery storage solutions, and how you can save money on your electricity bills – and possibly even earn money from excess power generated by your system, get in touch with our team today on 01226 715522 or email us at hello@ask-renewables.co.uk.

ASK Renewables is MCS-certified and a Which? Trusted Trader. We are also approved by the National Association of Professional Inspectors and Testers (NAPIT), have signed up to the Renewable Energy Consumer Code and are registered with the Trading Standards Institute Consumer Codes Approval Scheme (TSI).