With the imminent closure of the very successful Feed in Tariff (FiT) subsidy mechanism on the 31st March 2019 the department for Business, Energy and Industrial Strategy (BEIS) issued a consultation paper in January 2019 to replace the export FiT for small scale low-carbon generators called the Smart Export Guarantee (SEG).
With the closure of the FiT there were concerns that small-scale renewable generators would be exporting any electricity not used onsite to energy suppliers for free.
How is the SEG proposed to work?
The scheme applies to all the technologies currently eligible for the existing FIT scheme up to 5MW in capacity. It is proposed electricity suppliers with more than 150,000 domestic electricity supply customers will be obliged to offer small scale low-carbon generators a price per kWh for electricity they export to the grid.
However, unlike the existing export tariff:
- Generators will be paid for the electricity they actually export to the grid rather than the notional “deemed” export under the FiT scheme;
- There would not be a guaranteed price for the electricity exported back to the grid;
- Suppliers would determine a market-based tariff per kWh and the length of the contract, subject to the fact that the price for exported electricity must be greater than zero; and
- Energy suppliers with fewer than 150,000 customers would have the option to offer a tariff to generators.
This consultation is set to close on 5 March 2019, just a few weeks before the closure of the FiT scheme for new applications on 31 March 2019.
According to BEIS, this will lead to a “short hiatus period” before a replacement programme can be implemented. This will mean that, during this period, small scale low-carbon generators will effectively have no way to sell their excess capacity.
In its consultation document, BEIS stated, “Government’s view is that small-scale low-carbon electricity generation, where it is beneficial to government’s objectives and the electricity system, should deploy in a system where competitive, market-based solutions are brought forward.”
Whilst there are still some details to be worked out, not least what the structure of a fair, market based tariff could look like we are supportive of the initiative and pleased BEIS have taken on board the concerns that were raised when the FiT closure was announced without an alternative scheme to replace it.
There are a number of technical questions that need to be addressed, not least how exported volumes will be recognised in settlements (as they presumably will need to be) and then the knock-on impact for the incumbent energy supplier on how they manage any imbalance.
Claire Perry, the UK Energy Minister, said: “This new scheme could help us to build a bridge to the smart energy system of the future, with consumers firmly at its heart – not only buying electricity but being guaranteed payments for excess electricity they can supply to the grid.”
If the UK is going to meet its decarbonisation targets, the use of smart meters alongside onsite renewables and developing technologies such as battery storage and electric vehicles will be a key factor.