Since 1st January 2020, large energy suppliers with at least 150,000 customers in the UK have been required to pay households for the renewable energy they export to the National Grid. The scheme called the Smart Export Guarantee (SEG) was set up by the UK government to replace the Feed-in tariff which closed to new customers on 31st March 2019. To this day the Feed-in tariff pays many solar panel owners for the electricity they generate at home. Though not as generous a scheme, the Smart Export Guarantee pays households for the excess renewable electricity they generate but don’t use themselves.
The Smart Export Guarantee doesn’t only apply to electricity exported to the National Grid from solar panels (PV), other forms of small scale, low carbon energy renewable technologies also qualify including wind, hydro, micro combined heat and power and anaerobic digestion. The government said that any homes putting excess renewable energy into the grid were guaranteed payment under this scheme. You need to sign up to a SEG tariff with an energy supplier first in order to receive payments for your excess electricity.
The scheme was good news for the solar industry as it meant that households could still benefit from their solar generated energy in two ways, by saving money on their utility bills and by making money on the electricity they didn’t use. The introduction of the SEG meant that homeowners with solar panels no longer felt that their unused electricity was being wasted. It was also hoped that SEG rates would gradually increase as energy companies competed with another.
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However, in recent months the energy sector has been going through a very turbulent phase. Spiralling gas costs are causing considerable financial difficulties for thousands of households. The rising costs have also led to 30 of the mostly smaller energy companies going bust. The recent spate of closures is evidence of the depth of the current crisis in the energy market. The energy regulator, Ofgem has provided a safety net for millions of customers, maintaining energy supplies to domestic customers, and protecting their credit balances while moving their accounts to a new supplier.
At the same time electricity supplies are threatened due to most of the UK’s ageing nuclear reactors, which provide 20% of the UK’s electricity, being closed in the next few years. On top of this the UK is facing a dilemma if it is to succeed in reaching net zero carbon emissions by 2050. We need to reduce our reliance on the use of fossil fuels radically in order to keep to this target while growing our renewable energy industry to be able to meet our power demands in the future.
Currently, approximately half our electricity is generated by burning natural gas in power plants. About half of that comes to our shores from North Sea rigs whose overall output is dwindling as gas fields reach the end of their lives. The rest of our gas is imported from other nations; most of it is shipped from Qatar or the US or piped from Norway.
Without doubt, energy security and fighting climate change are inextricably linked.
Despite all this many of the energy suppliers that have survived are still providing the Smart Export Guarantee. The pandemic, Covid-19 does not appear to have had an adverse effect on the SEG. If anything, the demand for the SEG has risen during the crisis.
There are a few things to consider before you can benefit from the SEG.
In order to be eligible for the SEG there are 3 key requirements for all households:
- You must be located in the UK
- You need to be generating renewable energy at home via solar PV, wind, hydro, micro combined heat, and power (CHP), or anaerobic digestion (AD), with a maximum capacity of 5 megawatts.
- Your installation must be MCS certified. The Microgeneration Certification Scheme (MCS) certifies, quality assures and provides consumer protection for microgeneration installations and installers.
The next step is to sign up to a SEG tariff with an energy supplier so that you can receive payments for your excess electricity.
You will also usually need to get a smart meter installed which will allow for more accurate readings of the electricity you are exporting to the grid. The smart meter can make a recording of your electricity exports on a half-hourly basis and communicate directly with your energy supplier enabling them to pay exactly what they owe you. Fortunately, the UK government is currently carrying out a nationwide rollout of smart meters for free. The SMETS1 smart meter was incompatible with solar panels, but the second-generation SMETS2 is compatible, and any UK household is entitled to a free model before the end of 2025.
There are two different ways that you can be paid by suppliers for your excess electricity, either a fixed rate or a flexible rate.
Under the SEG, a fixed rate is a set amount of money for each kWh of renewable electricity you export to the grid, irrespective of the time of day.
A flexible rate SEG pays different amounts of money depending on the time of day. By way of example, you might be paid more for the electricity you export in the evening when there is a higher demand for electricity and less in the morning.
Eventually, the Department for Business, Energy and Industrial Strategy (BEIS) would like all fixed rate tariffs to be replaced by flexible rate tariffs, which go up and down every half hour based on wholesale electricity market prices.
The exact amount you receive for the electricity you export depends on your energy supplier.
If you look at the table of energy suppliers below you will see that most of the Big Six energy companies have fallen well short of what the Solar Trade Association considered to be a fair price for our excess electricity which was between 5p and 6p per kWh.
| Energy Supplier | Price | Name of Tariff |
|---|---|---|
| Bulb (own customers only) | 5.57p/kWh | Export Payments |
| Octopus Energy | 5.5p/kWh | Outgoing Fixed |
| E.On (for new E.On solar PV customers) | 5.5p/kWh | Fix & Export Exclusive |
| OVO | 4p/kWh | OVO SEG Tariff |
| ScottishPower | 4p/kWh | Smart Export Variable Tariff |
| SSE | 3.5p/kWh | Smart Export Tariff |
| Shell Energy | 3.5p/kWh | SEG V1 Tariff |
| British Gas | 3.2p/kWh | Export & Earn Flex |
| Utilita | 3p/kWh | Utilita Smart Export Guarantee |
| Bulb (for non-customers) | 3p/kWh | Export Payments |
| E.On (for all other customers) | 3p/kWh | Fix & Export |
| Utility Warehouse | 2p/kWh | UW Smart Export Guarantee |
| EDF | 1.5p/kWh | Export+Earn |
| E | 1p/kWh | E SEG January2020v.1 |
The Energy Saving Trust have estimated that a household with a 4kWhp solar panel system, a grid electricity price of 14.33p/kWh and Octopus Energy’s SEG rate of 5.4p/kWh could make £338 per year. In this example the EST is assuming that the 4kWhp system might generate 3,410kWh of electricity in a year and that the household might export half of this back to the grid. If you break this figure down it is comprised of £244 of energy bill savings and £94 of export earnings.
However, this is just an estimate and multiple variables will affect your earnings through the SEG. These include:
- how much electricity your solar panels can generate
- how much electricity you send to the grid
- how much you pay for grid electricity
- what SEG rate you receive
If you have invested in a solar-plus-battery system at home, you will need to find out whether your energy supplier will accept solar energy exported from a battery. Not all energy companies do, and some don’t make it clear online whether they do or not. Bulb, Octopus Energy and British Gas do offer this service but it’s as well to check with your energy company what their policy is about solar batteries.
With electricity prices rising exponentially it is important to make savings wherever you can. Now is a very good time to look at ways you can reduce your energy bills and solar panels are well worth the investment.
