Smart Export Guarantee Rates and the Case for Solar Batteries

A solar installation is an expensive prospect, so understanding how to maximise the value of your system is crucial. This article analyses the latest Smart Export Guarantee (SEG) rates available for solar PV installations and explains how adding a solar battery can enhance the financial performance of your system.

The Smart Export Guarantee scheme

The Smart Export Guarantee (SEG) scheme offers a convenient way for solar panel owners to sell excess power they generate to the grid.

The energy regulator, Ofgem, requires the biggest energy suppliers to offer SEG tariffs to any customers with an MCS-certified solar PV installation of less than 5MW of capacity and a smart meter.

Scheme participants receive a price for each kWh of electricity fed into the grid, according to the tariff you've agreed with the energy supplier.

The SEG scheme is a convenient way to get paid for any excess electricity your solar panels generate.

Available Smart Export Guarantee tariffs

Although the biggest domestic and business energy suppliers are required to offer an SEG tariff, there are no restrictions on the rates they pay for electricity, and there is significant variation between the best and worst SEG tariff rates.

However, all SEG rates are significantly lower than the rates homes and businesses pay to use (import) electricity from the grid.

• Best SEG export rate: 16.5p/kWh
• Lowest SEG export rate: 3p/kWh
• Current energy price cap import rate: 26.7p/kWh

It can seem unfair that all energy suppliers charge you significantly more for the electricity you use compared with the electricity you sell back to them.

However, the difference in rates reflects the cost of power transmission and environmental levies that are incurred to deliver a power supply.

The reasons SEG rates are so low

Domestic and business electricity prices in Britain aren't simply the cost of generating electricity, but also incorporate the following three direct costs that suppliers incur to deliver a power supply.

None of these costs are refunded when power is exported onto the grid at a local level through the SEG scheme, resulting in export rates that are significantly lower than import rates.

Transmission and distribution costs

Each time energy suppliers deliver electricity to a customer, they pay to use the national and local electricity distribution grids to transport electricity from where it is generated to where it is used.

These charges vary depending on your location, but account for approximately 20% of your electricity bill. 

Grid balancing

The National Grid operator, NESO, performs a vital and expensive role in maintaining voltage and frequency stability on the grid. NESO strategically pays gas power stations and pumped hydro storage facilities to start and stop electricity generation on demand to keep the grid stable.

NESO's work is funded through balancing charges paid by all electricity suppliers, which make up approximately 3% of unit charges on electricity bills.

Environmental costs

Since 2002, the UK government has subsidised large-scale renewable energy generation, facilitating an explosion in the capacity of wind and solar generation.

These schemes, called the Renewable Obligation and Contracts for Difference, are funded through electricity bills.

Each time a supplier delivers electricity to a customer, they must pay into the schemes.

The business case for solar batteries

The fact that SEG export rates are significantly lower than import rates creates a financial opportunity for investing in solar batteries. Here we explain why purchasing a solar battery can quickly pay for itself.

On a cloudless summer day, solar panels generate their maximum power output. Without a solar battery, the power must either be used immediately by power-consuming devices in your property or exported back to the grid through the SEG scheme.

A solar battery provides an additional option, allowing power usage to be prioritised as follows:

• Consumed immediately on-site by power-consuming devices.
• Charges a solar battery when there is excess power generation.
• Exports to the grid only if the battery is full.

The power stored in the solar battery is then utilised when the sun goes down and the demand of devices on-site can no longer be met by solar generation.

This temporarily stored power is more economically utilised, eliminating expensive electricity imports at approximately 27p/kWh, rather than just earning Smart Export Guarantee rates.

The current saving from temporarily storing electricity in a solar battery is more than 10p/kWh, even with the best SEG tariffs.

Over time, this process of storing and using your own solar energy, rather than exporting it for a lower return, repeats itself day after day. The result is a compounding financial benefit that significantly reduces your reliance on grid electricity and cuts your electricity bills.