The role of the Smart Export Guarantee four years on

Introduced in January 2020 in an attempt to boost the domestic solar PV market following the abolition of the government’s Feed-in-Tariffs nine months earlier, the SmartExport Guarantee (SEG) is about to enter its fourth year.

SEG enters its fourth year

It lets small-scale generators (i.e. individual households) get paid for the renewable energy they export to the grid. This applies to electricity generated from wind, hydro, anaerobic digestion and micro combined heat and power, as well as solar PV. But is the SEG still relevant today?

This was one of the topics up for debate during the recent Solar & Storage Show held at the NEC in Birmingham. The issue was explored by Brian Horne of the Energy Saving Trust, Jordan Dilworth of The REA and Solar Energy UK’s Chris Hewett.

Smart Export Guarantee latest stats

Ofgem has now issued three annual reports looking at SEG; the latest of which was published at the end of September and covered the period April 1, 2022, to March 31, 2023.

It said there had been 92,946 installations during that period that were registered to a SEG tariff, up significantly from 34,020 the year before. This refers to any installations that have been registered, reported export or received a SEG payment at any point during the SEG year. Due to the way the figures are recorded, it also means that if someone switches tariffs during the year, they will be double counted.

According to data analysis by the Energy Saving Trust, 250,000 new renewable energy installations were completed in a similar time frame, which would suggest that despite the significant rise, the majority of domestic installations are still not receiving a SEG.

A total of 39 tariffs were offered by the 14 SEG licensees, up from 35 the previous year and 21 in the first year.

The majority of the tariffs (24) were unbundled – as in available to any eligible installation – and 15 were bundled, which means they were reliant on other conditions being met, such as buying electricity from that particular provider.

The average tariff received by small-scale electricity generators has fluctuated from 4.34p/ kWh in year one, to 12.15p in year two, to 8.77p/ kWh in year three.

The role of SEG today

While SEG initially had a role to play in filling a hole that was left by the feed-in tariffs, its purpose today is less clear, particularly given that more than half of those who are generating electricity on a small scale (up to and including 50kw in size) are not receiving it.

Some possible reasons for this were explored during the panel discussion, including the increase in battery storage, the range of flexible schemes and tariffs available anyway, how much energy suppliers understand and appreciate the value of the SEG, and difficulties around getting SEG in social housing.

Battery storage and the SEG

Where people have battery energy storage systems as part of their renewable installations, SEG isn’t as straightforward. Energy suppliers don’t have to pay for grid electricity that has been stored in a battery (known as brown electricity), although some choose to.

Others may only pay for the green energy that has been generated and might ask for this to be separated out, which could be problematic.

SEG in social housing

Another issue which was raised from the audience was the difficulty in getting smart export guarantees set up in social housing.

Chris Clark of EMTEC Energy asked: “Could SEG not be working because of the way it’s set up? For example, it’s almost impossible for local authorities to access SEG because they own the asset but the tenant controls it. Many millions are being wasted because of this. I’ve spent three years trying to resolve this…..maybe getting access to SEG would lead to more installs by social landlords.”

Brian Horne confirmed that two thirds of the installs not using SEG are in social housing. He said it’s unclear as to how this can be resolved as it’s not at the top of people’s agendas, but unlinking the tariff from the asset somehow could be a solution to explore.

Energy suppliers

Under the Smart Export Guarantee, all licensed energy companies with 150,000 or more customers must provide at least one SEG tariff that is open to everyone, while smaller suppliers can choose to on a voluntary basis.

There are no parameters other than the tariff must be greater than zero at all times. It means some suppliers might offer just one tariff on a low rate.

Commitment to the scheme from suppliers was also questioned.

The Ofgem report showed Octopus had the broadest range of tariffs available and the highest number of registrations, accounting for 67% of the total SEG installations.

MCS certification

Currently, the technology and installer used by households must be certified by MCS or equivalent to qualify for a SEG tariff. Panelists were asked whether they thought this could be a reason why a minority of installations are registered with SEG, but none felt this was the case.

MCS has seen record numbers of batteries being installed alongside solar PV each month since it introduced the battery storage standard and started measuring installs. This could also suggest that people are more invested in decarbonising their homes and becoming fully energy independent, than relying on being able to sell energy to the grid.

Commenting on this aspect, MCS CEO, Ian Rippin, said: “We now live in a post-subsidy world where home solar energy users can save money without having to rely on incentives. Installing an

efficient, competently installed, certified system is an affordable way to take control of your energy, reduce your bills, and decrease your carbon footprint. With the enormous growth in battery storage systems we’ve seen in recent years and the advancements in home energy solutions like EV chargers empowering homeowners to use the energy they generate at home in more and more ways, there’s never been a better time to invest in your net zero future.”

After the discussion, the panellists summed up their views:

Brian Horne, technical knowledge lead at Energy Saving Trust

“The Smart Export Guarantee may have provided some additional incentives to support continuing domestic PV installations following the end of the feed-in tariff in April 2019.

“However, the increase in electricity prices seen in the past two years, alongside the increased availability of battery storage and multiple flexible or variable tariff options, mean that the current SEG regulations are no longer relevant, despite the fact that many of these new tariffs are classified as SEG tariffs.

“The SEG has had no impact on any renewable generation technology, other than solar PV, which limits it further.”

Chris Hewett, Solar Energy UK chief executive

“It is pretty clear that change is needed to the Smart Export Guarantee. Although it is fair that the main benefit of rooftop solar comes from cutting bills, rather than from exporting power to the grid, rates from some energy suppliers are absurdly low.

“But more needs to change than the rates available: the customer and installer experience leaves a lot to be desired. There are inconsistencies in suppliers’ approaches to grid connection paperwork, the rules governing installations above 50 kilowatts are confusing and there is plenty of room for improvement in customer service, too.

This all results in a messy experience for solar buyers, so we think standardising the application process could be the answer,” he added.

Jordan Dilworth, policy analyst for power and flexibility at the REA

“Since the energy crisis, the SEG does not feature as strongly in the consumer case for installing solar panels due to consumers being primarily motivated to cut the cost of energy bills by installing a renewable generation system.

“However, the SEG still represents a valuable route to market in the long term. Reforms to the SEG, such as longer contracts and increased parity between the wholesale price of energy and value of exporting energy back to the grid, could improve the consumer case for domestic renewable generation, thereby increasing the deployment of rooftop solar deployment.”