If you’re interested in installing commercial solar panels in your business, you might have heard about a scheme called the Feed-in Tariff scheme which allows you to earn money by selling excess electricity you generate back to the grid.
Unfortunately, that scheme ended to new applicants on 31 March 2019, so it is no longer alive or relevant for new adopters.
Why did it close?
The FiT scheme was a subsidy scheme created by the Government to facilitate growth in solar generation at a time when the cost of adoption was higher than it is now. When these costs dropped, the Government dropped the scheme — but they didn’t anticipate the adverse effect this would have on new installations.
Dropping the FiT scheme caused an almighty crash in new solar installations. Between the period of March and June 2019, installations dropped by 94% as potential adopters saw no reasonable financial incentive to go ahead.
Not only that, it was really quite cheeky for the Government to expect adopters to export their excess energy to the grid for free. The disabling of the FiT scheme basically took power away from the producer and gave it to the grid.
This caused a rethink, and thanks to pressure from the energy industry, a new scheme has been launched called the Smart Export Guarantee (SEG).
Smart Export Guarantee
The Smart Export Guarantee is a direct replacement for the FiT scheme. It enables people who generate excess renewable energy (several types are permissible) to export that energy to the grid and earn payment for doing so.
Here’s the list of permissible renewable energies:
- Solar panels
- Domestic wind turbines
- Anaerobic digestion
- Micro combined heat and power
With regards to solar panels, both domestic and commercial generators are allowed to sell energy to the grid.
The Smart Export Guarantee will come into force on 1 January 2020, enabled via electricity suppliers with 150,000 or more customers who must offer a tariff that makes payments for excess renewable electricity exported to the national grid. Suppliers with less than 150,000 customers can offer a SEG tariff by choice.
How much will I earn from the Smart Export Guarantee?
Unlike the now defunct Feed in Tariff scheme, the Smart Export Guarantee allows the electricity company to set the rates for their own tariff. The only requirement is that the tariff must be greater than 0 at all times.
In practice, this means you could earn hardly anything at all for exporting to the grid. In reality, the market will be driven by competition so it is expected there will be some tasty fixed-rate tariffs available under the SEG.
Octopus Energy, for example, have a tariff that offers 5.5p per kilowatt hour of exported electricity. Research from the Energy Saving Trust shows that this could earn a household (or small business) around £300 per year. Octopus Energy put the rate at over £400, giving you a decent benchmark to work against.
In the final quarter of the now defunct Feed in Tariff scheme, the highest rate was 5.38 p/kWh which gives us a clue as to what to expect in the near future. The middle rate was around 3.5p per kilowatt hour and the low rate around 2.0.
Types of SEG tariff
Most suppliers are expected to offer two types of tariff:
- Fixed rate
- Flexible rate
Fixed rate SEGs fix the price per kWh of electricity exported to the grid.
Flexible rate SEGs pay a variable rate which varies on market demand (you will be paid more for exporting to the grid at peak times).
Which type of tariff will suit your business depends on how much electricity you export, when you export it, and the price per kWh you receive. As always, you should compare the various tariffs available before making a decision.
How can I qualify for the SEG?
It’s important to point out there are criteria for becoming eligible for the Smart Export Guarantee. Not everyone will qualify.
There are three things you need to know:
#1 Generation limit: The first thing you need to know is the generation limit – only solar systems up to 5MW are eligible. Most solar systems (especially in the case of small and medium-sized businesses) are much smaller in capacity than this.
#2 Certification: The second thing you need to know is the technology and the installer must be certified under the Microgeneration Certification Scheme (MCS) or equivalent in the eyes of Ofgem / BEIS. It’ll be easiest to choose MCS certification.
#3 Metering: The third thing you need to know is exported power must be metered half hourly without exception. This will require a dedicated export meter. Half-hourly metering is necessary to accurately track the power you export.
The biggest change with the SEG over the FiT with regards to eligibility is there are no requirements for a property to meet energy efficiency standards under the SEG. This opens up the scheme to a wider range of generators than the FiT scheme.
Other things you need to know about the SEG
SEG and energy storage
If you make use of energy storage (batteries) to harvest some of the excess electricity you generate, you can sell this to the grid anytime as green electricity. However, if your storage system also stores electricity imported from the grid (brown energy) your SEG provider may only pay you for the green portion of it — and they may ask for proof to show the portion of green energy they buy from you is correct.
Because the only requirement for a SEG tariff is for it to be above 0 (which means you are always paid at least something for the electricity you export to the grid) flexible (variable) tariffs will carry a degree of risk. Most businesses will benefit from a fixed-rate tariff, so they know the exact rate they are being paid at all times.
Although you will be paid something for exporting electricity to the grid, you’re unlikely to get rich unless your solar system is very large. For most businesses, the decision to install solar panels will remain more of an environmental one than a financial one. However, there are other financial incentives to solar panels. These include reduced dependency on the grid and protection against rising utility rates.
Existing Feed in Tariff customers
If you happen to already be receiving payments under the Feed-in Tariff scheme, you will need to opt out of that scheme to become eligible for the SEG. You might opt to do this if a better rate becomes available with a Smart Export tariff.
Want to know more?
Hopefully, this guide has given you a solid introduction to the Smart Export Guarantee. If you’d like to find out more about it, we’re here to help. Call us on 0333 050 8419 or email us at [email protected].