What is the Smart Export Guarantee?

Back in 2010, the Department for Business, Energy and Industrial Strategy (BEIS) introduced the Feed-In Tariff (FiT) scheme that encouraged businesses and domestic homeowners to invest in small-scale renewable energy generation such as solar panels and wind.

The scheme was widely considered a success but was ended in March 2019. However, after its ending, concerns were raised by the industry that without the scheme most new small-scale electricity generators would not receive any income for the electricity they would provide to the wider network.

Without that incentive, concerns were raised that less and less investment would be put into renewables. Following these concerns and consultation with industry, the BEIS introduced the SEG.

The SEG is an obligation set by the UK government for all licensed electricity suppliers to provide a tariff and make payments to their customers who use small-scale, low-carbon generators that export electricity to the National Grid.

Typically homes with solar panels will generate more energy than they need so instead of letting the excess go to waste the surplus is exported to the grid. Under SEG anyone that produces more energy than they use receives payments from their supplier.

Consumers who generate electricity using renewable sources are eligible to receive payments from suppliers under the SEG scheme. The types of generation eligible are:

• Wind power
• Solar photovoltaic
• Micro-combined heat and power
• Hydro
• Anaerobic Digestion

Anyone who already receives payment for their Feed-in Tariff on their installation will be unaffected by the SEG.

Under the rules set out by the government and Ofgem all licensed energy suppliers with 150,000 or more domestic customers must provide at least one SEG tariff. If a supplier has fewer than 150,000 then it does not have to provide a tariff but can participate in the scheme on a voluntary basis.

Most energy suppliers that participate in the SEG scheme have created tariffs that fall under a fixed rate or flexible rate.

Fixed rate SEGs have a set amount that the supplier will pay per kilowatt hour of electricity exported to the grid regardless of what time it is exported. Most of the tariffs on offer currently fall under this category.

Alternatively, there are flexible tariffs that pay varying amounts depending on how needed the electricity is by the grid at different times of the day. A customer could be paid more or less for exporting electricity at a time of high or low demand.

Suppliers could also offer multi-rate SEGs where there are different set rates for electricity exported at different times, such as day and night rates, or weekday and weekend rates. The price you are paid must not be below zero at any time.

The offering of SEG tariffs should be a potential way for an energy supplier to attract new customers. A customer’s electricity supply doesn’t have to come from the supplier who provides SEG payments for example, so those offering the best rates and tariffs could gain a competitive advantage.

For more advice on SEG and what it means for your energy supply business get in touch

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