All you need to know about the Smart Export Guarantee for solar

The Smart Export Guarantee (SEG) is the government’s new export payment scheme for renewable electricity, affecting any business that has installed solar PV.

Posted on 22 January 2020

 

What is it?

The Smart Export Guarantee (SEG) is the government’s new export payment scheme for renewable electricity, following the closure of the previous Feed-in-Tariff (FiT) scheme in April 2019.

From 1 January 2020, the SEG requires all energy suppliers with over 150,000 customers to offer a competitive tariff for renewable energy exported to the grid by their customers. Unlike the 20-year FiT payments, which were set by the Department for Business, Energy and Industrial Strategy (BEIS), SEG tariffs are set by the market, and alongside fixed rates also include variable tariffs (where the amount paid for exported energy is different throughout the day/year).

The best SEG tariff on the market is currently by Social Energy at 5.6p/kWh, which is close to the final FiT export rate. For perspective, many household customers will be paying 13-14p/kWh for grid electricity.

Who will it impact?

Organisations and households generating up to 5MW of renewable energy can be eligible for SEG payments, with some suppliers offering separate rates for installations under 20kW (i.e. most domestic solar installations). The SEG applies to both domestic and non-domestic installations such as solar PV, wind, combined heat and power (CHP) (<50kW), hydro and anaerobic digestion. Different rates will apply for different technologies.

What do I need to know?

To be eligible to receive SEG payments, your installation will need to be MCS-accredited, and requires half-hourly metering, which would usually take the form of a smart meter for domestic installations.

Under the FiT, solar PV systems received an export payment (assumed to be 50% of generation), in addition to a generation payment, which declined significantly up to the end of FiTs (14.69p/kWh in 2014, 4.03p/kWh in 2019). Under SEG, there will be no generation payments, only export payments, meaning generators will likely be worse off than under the FiTs arrangement. The below table from Which? provides a comparison:

 

 

Feed-in Tariff

Smart Export Guarantee

Export rate

5.38p/kWh

5.5p/kWh

Export earnings (annual)

£92

£94

Generation rate

3.79pkWh

0p/kWh

Generation earnings (annual)

£129

£0

Energy bill savings (annual)

£244

£244

Total (annual)

£465

£338

 

Feed-in tariff rates are those available in March 2019. Smart Guarantee rate taken from Octopus in July 2019. Based on a 4kWp system and electricity price of 14.33p/kWh and assumes 50% export.

The SEG has been designed to encourage flexible tariffs and ‘smart’ energy systems. For example, Octopus Energy’s smart tariff matches the half-hourly prices for export with day-ahead wholesale rates, encouraging the use of battery storage and demand shifting to match exported energy to peak demand. Flat rates are also on offer but may be less lucrative.

Despite a promising start for SEG rates, the SEG should only be seen as a tool to support the overall business case for renewables, which should primarily be focused on energy bill avoidance (over 70% of system savings in the above example).

What should I do next?

The market is still young – keep an eye on new tariffs and offers from competing suppliers who will be testing models and pricing. Despite Shell Energy’s opening offer of 0.001p/kWh, it has allayed fears to see many suppliers offering initial tariffs similar to the final FiTs export rate.

Whilst SEG payments may not be significant, there is potential for increased income if energy generators and users can combine energy storage with smart appliances that can shift demand. Using flexible tariffs, the ability to both increase savings and income will improve the wider business case for renewables, battery storage, EVs and other ‘smart’ systems.

For more information on the SEG, both Ofgem and Which? have published comprehensive guidance.

Can you help me?

If you’re a Greater Manchester SME looking to install renewable energy systems, contact our Resource Efficiency team who may be able to assist with design and funding.

If you’re an installer or supplier, get in touch with our Green Technologies and Services Sector team who can help you take advantage of current incentives.

 

 

Posted under General Interest on 22 January 2020