BEIS (Department for Business, Energy & Industrial Strategy) have now responded to consultation feedback on the Smart Export Guarantee (SEG). SEG is a replacement for the FIT scheme for new solar pv installations as well as for other small scale renewable generation. The new SEG scheme, to be managed by the large energy suppliers, will be operational from January 2020. It will cover payments for small-scale low-carbon generators (upto 5MW) for electricity export to the grid for:
- Solar pv
- Anaerobic digestion
- Micro-combined heat and power (with an electrical capacity of 50kW or less)
- Onshore wind.
Homeowners will need a Smart meter to be part of the SEG scheme. It is likely that energy companies will offer either flat rate payments for each kWh of electricity exported or payments will be linked by Smart meter to wholesale electricity prices, either for each day or even for each 30-minute period. Homeowners should be able to shop around for the best deal as they do with their energy supply.
The Difference Between SEG & FIT Schemes
Under SEG there are no generation tariffs and no specified minimum export tariff for homeowners with solar panels, other than that a supplier must provide payment greater than zero at all times of electricity export. This compares with the old FIT scheme which set a 20-year guaranteed price both for electricity exports to the grid and for the total electricity generated.
This “market led” approach means there is no long term electricity export pricing for homeowners to rely on when considering investments in solar pv panels. The large licensed energy suppliers will set their own tariff payment levels for solar energy exported by homeowners to the grid and these can change over time. All licensed energy suppliers with 150,000 and over domestic customers will be required to provide at least one tariff offer to any eligible exporter (and they are free to offer more than one tariff); other suppliers may participate on a voluntary basis.
BEIS recognises that this large energy supplier led approach is “unlikely to provide the same level of long-term income certainty offered by previous subsidy schemes such as the FIT. The transition from subsidised export to market competitiveness will inevitably have an impact on the manner in which the small-scale generation sector operates.“
The SEG scheme may also help those with battery storage. BEIS state that the legislation will provide “suppliers with the flexibility to purchase power from more complex systems including small-scale storage, and other forms of generation, if they choose to do so (and provided they are co-located with a SEG installation).“
What Does The SEG Scheme Mean For Export Payments On New Rooftop Solar PV Panel Installations?
Early pricing from a couple of energy suppliers show two different approaches emerging:
- A flat rate paid per kWh exported
- 5.5p per kWh exported (Octopus Energy)
- 5.24p per kWh exported (EON, Solar Reward Programme for first 500 customers who install solar panels only)
- Half hourly pricing on exports matched to wholesale rates
- Rates based on wholesale electricity rates which changes every 30 mins
At this early stage only two electricity suppliers have published flat rates and these are not guaranteed for any length of time. However they are in line with the previous FIT export payment rate of 5.38p per kWh.
The introductory flat rates may have other conditions (such as purchasing gas and electricity from the same supplier) and could go up or down in the future so can not be relied upon. Assuming that longer-term the market offers a flat rate of between 3-5p per kWh then Typical SEG annual benefits, assuming 50% export on a 4kW Peak solar array, could be:
- £51-60 payment per year, based on an average 3p per kWh SEG rate
- £85-£100 payment per year, based on an average 5p per kWh SEG rate
See Solar PV Panel Payback And Costs In 2019 for details of calculations.
For homes with solar panels alone, the flat rate will probably be the most attractive option rather than a rate linked to wholesale market pricing. However, for those with battery storage, when stored electricity can possibly be exported at peak times at more attractive rates, the wholesale pricing rates linked to Smart meter use may be beneficial. It will take a little time for energy suppliers to develop the software solutions to these so watch for developments over the next few months.