The SEG will guarantee payments for small scale clean energy generators
New SEG will guarantee payments for homes and businesses generating their own renewable power and exporting to the grid
Homes and businesses that generate their own clean power from small-scale renewables installations and export it to the grid will be guaranteed a payment from energy suppliers under new legislation to be introduced by the government tomorrow.
Following consultation earlier this year, the Smart Export Guarantee (SEG) will be laid in Parliament tomorrow before the legislation comes into force for mandated energy suppliers on 31st December 2019, the Department for Business, Energy, and Industrial Strategy (BEIS) confirmed today.
The SEG is designed to ensure small-scale electricity generators installing solar, wind, or other firms of renewables with a capacity of up to 5MW will be paid for each unit of electricity they sell to the grid.
It follows a U-turn from the government in January after fierce criticism from the solar sector and green groups over its previous plans to axe support for solar installations in a way that would have effectively required households and businesses to provide excess power that they fail to use on site to the grid for free.
After controversially removing financial incentives for new small scale renewables installations with the closure of the feed-in tariff incentive, the government announced plans for the SEG mechanism arguing it would establish a market to ensure renewable power generators can always sell their power to the grid.
The Labour Party last week accused the government of “actively dismantling” the UK’s solar sector, after new panel installations by households collapsed by 94 per cent during the first month after the FiT scheme ended in April.
But acting Energy and Clean Growth Minister Chris Skidmore, who is standing in while Claire Perry takes a ministerial leave of absence, said the SEG would build on the previous FiT scheme and encourage small scale installations of renewables in the UK.
“The future of energy is local and the new smart export guarantee will ensure households that choose to become green energy generators will be guaranteed a payment for electricity supplied to the grid,” he said. “We want the energy market to innovate and it’s encouraging to see some suppliers already offering competitive export tariffs to reduce bills. We want more to follow suit, encouraging small-scale generation without adding to consumer bills, as we move towards a subsidy-free energy system and a net zero emissions economy.”
Residential solar panels are now over 50 per cent cheaper than in 2011 after the FiT was introduced. The scheme helped drive installations of around 850,000 small-scale renewables projects, but was dogged by boom and bust cycles as the government repeatedly cut subsidy rates in a bid to tackle excessive returns for households and businesses that deployed renewables systems.
BEIS finally closed the scheme in March and said the new SEG mechanism would represent a more cost effective and sustainable approach for both billpayers and those installing renewables.
The SEG will place a legal obligation on energy suppliers with over 150,000 customers to introduce export energy tariffs by 1st January 2020. The rules will cover more than 90 per cent of the retail market, according to BEIS.
A number of energy suppliers, such as Octopus and Bulb, are already introducing smart energy tariffs for customers in order to incentivise the use of power at times of least demand, thereby easing pressure on the grid. In some cases customers can save or earn money from storing or generating electricity.
Welcoming today’s announcement, Greg Jackson, chief executive of Octopus Energy, said smart exports “are game changing when it comes to harnessing the power of citizens to tackle climate change”.
“They mean homes and businesses can be paid for producing clean electricity just like traditional generators, replacing old dirty power stations and pumping more renewable energy into the grid,” he said. “This will help bring down prices for everyone as we use cheaper power generated locally by our neighbours.”
However, some concerns are likely to remain over the gap between the FiT scheme ending this spring and the new SEGs scheme being fully up and running. There are also questions across the sector as to how the new market for exported power will be created and regulated given the high profile technical challenges and delays faced by the government’s national smart meter roll out.
In addition it remains to be seen how energy companies will package purchase agreements for exported power and whether the price they are willing to pay will improve the financial argument for businesses, schools, and households to install onsite generation technologies.