What is The Smart Export Guarantee?
The Smart Export Guarantee (SEG) came into force on 1 January 2020 as a replacement for the Feed-in Tariff (FIT). While the FIT paid solar panels owners for the energy generated at home, the SEG pays households for the excess renewable electricity they generate and contribute to the grid. Big energy companies began to participate in the scheme from the beginning of 2020. To be part of the SEG scheme, you need to generate energy produced by the following renewable technologies:
- Solar panels (PV)
- Micro combined heat and power
- Anaerobic digestion
Going by the government's new rules, homes that contribute excess renewable electricity into the grid are guaranteed payment for their contributions under the new scheme.
However, you would have to sign up for an SEG tariff with a company. Otherwise, you risk losing some money as the excess energy will be exported to the National Grid for free.
The beneficiaries of this scheme are essentially small-scale electricity generators. This means householders and small businesses that have solar photovoltaic (PV) panels or wind turbines, hydroelectric, and anaerobic systems of up to 5MW capacity and micro combined heat and power up to 50kW.
Solar PV is currently the dominant technology in this list, given that it is now fitted to over 7m UK homes. With the rate of solar PV installations tumbling by 94%, ensuring payment for any excess electricity generated from new installations will greatly address that slide.
How does the SEG work?
SEG Licensees are designed to set-up a structure that pays for the electricity exported by the eligible installation and to report to Ofgem on installations that are subject to SEG arrangements. SEG Licensees are expected to decide the rate they will pay, length of the contract, and other terms.
However, whilst wholesale electricity prices can sometimes fall below zero, SEG Licensees must always offer a tariff that remains above zero. SEG payments must be always be calculated by SEG Licensees using Export Meter Readings.
The best part about installing a renewable generation technology is that when you sign up for an SEG tariff, you use more renewable electricity, and you also get to save money in the long run.
Who pays the SEG?
This is a free enterprise market provided through energy companies such as Octopus Energy. You might need to shop around for a price that suits you since companies set their own SEG tariff prices. Although companies are mandated to pay more than zero, there are companies paying between 0.5p/kWh and 5.6p/kWh as of January 2020.
Since you are buying less electricity from the grid, you should save money on your electricity bill. However, your actual bill savings and SEG earnings will depend on:
- The quantity of electricity you export to the grid
- Your export tariff rates
- Time of export (if the SEG has a time-variable rate)
- The quantity of electricity used by you
- The price you pay for electricity.
Take this into consideration whenever you are thinking of renewable energy generation. Factor it against the cost of installing the system and the maintenance costs. This way, you will be able to calculate how long it'll take your system to pay for itself.
What is the difference between the Smart Export Guarantee and Feed-in tariff?
With the feed-in tariff (FIT), the payment rates are fixed by Ofgem and the government. Regardless of the supplier that pays you, the rates are uniform. These payments are estimated to be 50% of the total electricity generated and was paid for by a levy on all customers' energy bills.
Conversely, SEG tariff rates are fixed by the companies alone. Payments are which are done by the companies that but the power is based on the measured amount of electricity that is contributed to the grid.
Types of Smart Export Guarantee tariff
There are two major types of Smart Export Guarantee tariffs:
This is the set amount that SEGs pay per kilowatt-hour of electricity that is exported to the grid. This is regardless of the time of export. Most of the SEG tariffs on offer at the moment follow this pattern. It is the more popular of the two at the moment.
Depending on how important the electricity is to the system at the time, the SEGs may pay varying amounts. For example, if the rates are tied to day-ahead wholesale prices. So you could be paid more for exporting electricity at a time when the demand for it is high. Night and day rates, for example.
SEG companies may also offer multi-rate SEGs where there are different set rates for electricity exported at different times. Some other companies even offer variable rates where the company might modify the tariff based on how much they intend to pay at the time. There is often notice, though (say 30 days).
Regardless of the type of SEG rate, ensure that the price you are paid is not below zero at any point in time.
How to get a Smart Export Guarantee tariff
If you installed renewable generation systems at home, you should be able to sign up for an SEG tariff. However, to qualify for the SEG, your installed renewable energy systems must meet the Micro-generation Certification Scheme (MCS) standards. Here are some of the criteria you are expected to meet:
- Your installation must be 5MW capacity or less (50kW for micro-CHP).
- You'll need a meter that can provide half-hourly readings for electricity export.
- Your installation must be MCS-certified.
You will also need a smart meter to enjoy the benefits of SEG since you need to make half-hourly meter readings.
The preceding FIT system paid more to the exporters of renewable energy. Yet the SEG scheme has the potential to revive the renewable industry by making it smarter and able to incorporate the more disruptive technologies like battery storage into the UK's renewable generation industry.