An update on Smart Export Guarantee

The Department of Business, Energy and Industrial Strategy (BEIS) has published a response to their consultation on the future for small-scale low-carbon generation, which sought views on policy proposals for a Smart Export Guarantee (SEG).

The SEG will require suppliers with at least 150,000 domestic customers to provide a minimum of one tariff offer to small-scale low-carbon generators. Exporters of up to 5MW capacity of anaerobic digestion, hydro, micro-combined heat and power, onshore wind, and solar photovoltaics are eligible for payment.

It is the government’s opinion that small-scale low-carbon electricity generation should be supported by competitive, market-based solutions. To this effect, the government will not specify a minimum tariff rate in order to allow the market to develop. However, a supplier must provide payment greater than zero at all times of export.

The SEG is a replacement for the Feed-in Tariff (FiT), which closed to new generators in March 2019. The Feed-in Tariff scheme was originally introduced in April 2010 in order to incentivise the development of small-scale renewable generation from decentralised energy solutions. Generators were paid a fixed rate determined by the Government, which varied by technology and scale.

How will this impact you?

All suppliers that meet the SEG criteria will be required to offer at least one tariff by an expected date of 31 December 2019, providing small-scale generators with a choice of who they want to export to.

Currently, there are very few suppliers that offer tariffs of this nature. However, as the deadline approaches it can be expected that all larger suppliers will begin to offer their own options, allowing generators to choose the best tariff for themselves.

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Record Breaking Solar Generation

A week of clear skies and warm temperatures has seen the UK break its all-time record for solar PV generation twice in as many days.

National Grid reported a new all-time peak for solar generation on Monday 13 May at 9.47GW. This surpassed the previous record which had held for two years, when supply hit 9.38GW in May 2017.

 

 

This record was then broken again the following day, when output peaked at 9.55GW on Tuesday 14 May. On that day, at its peak, solar generation was producing 27% of UK electricity.

Peak solar generation has averaged 8.7GW since Saturday as temperatures climbed over the weekend and weather conditions turned significantly brighter. The previous week when conditions were far cloudier, generation peaked at less than 5GW on average.

 

Growth in Solar Capacity

The new record for solar generation has come despite minimal growth in installed solar capacity in recent years. Total installed solar capacity has risen by just 0.5GW since April 2017, following the closure of the Renewables Obligation subsidy scheme. Total capacity is currently 13GW, having grown nearly 10GW in the three years from 2014 to 2017.

 

Impact on Demand

Solar output has a narrower window of generation than other fuel sources. High levels of solar generation during daylight hours are more impactful on reducing system demand, both the overall daily peak and the afternoon low. Solar generation raises the volume of embedded electricity, in which homes and businesses are generating their own supply via solar panels. Embedded generation removes the demand for that electricity from the transmission network. The higher the availability of embedded generation the lower the system demand. This is why the transmission network sees a sizable reduction in consumption across the middle part of the day, when solar output is at its strongest.

During the record solar generation on Tuesday, demand on the transmission network saw a drop of more than 6GW from the early morning high. Consumption dropped to just 25GW before climbing again for the post-work peak.

 

 

Peak electricity demand on the network is at record lows and is forecast to fall even further as the summer season progresses. 2019 as a whole has seen peak consumption trend lower than previous years, reflecting the greater efficiencies and renewable availability on offer. In the last week of May, a half-term school holiday, electricity demand is forecast to peak at just 31GW, an all-time low.

 

 

A Benefit to All Customers

In addition to the environmental advantages of renewable generation, distributed solar provides many benefits to the grid and by extension to all electricity consumers. Reduced demand on the system improves grid security and the often onsite nature of solar generation leads to less losses in electricity.

The demand reductions caused by higher levels of distributed solar generation, mean that less fuel is being used to power the electricity network. As demand falls wholesale prices fall,  the less efficient gas plants are no longer required so overall cost of generation is lower. These dips in demand means that hourly prices for the early afternoon are now on at similar levels to the prices normally recorded in the middle of the night. As more solar reduces prices in the daylight hours the cumulative effect of all the additional generation is to bring prices lower.

The government is currently analysing feedback on the proposal for a Smart Export Guarantee (SEG), designed to replace the now-closed Feed-in Tariff. This scheme would legislate for suppliers to provide tariffs to pay small-scale low-carbon generators, such as solar panel owners, for the electricity they export to the grid. Some suppliers have already begun to offer tariffs, based on the same concept, to incentivise the export of solar power to the grid.

Government confirms closure of Feed-in Tariff

The Government has confirmed plans to remove the export tariff for solar power, which currently provides owners of PV panels revenue for excess energy that they generate. This will coincide with the closure of the Feed-in Tariff (FiT) scheme.

Though a large proportion of respondents to the governmental consultation disagreed with the plans, the Department for Business, Energy and Industrial Strategy (BEIS) has decided that both the Feed-in Tariff subsidy scheme and the export tariff will close to new participants after March next 2019.

 

What was the Feed-in Tariff (FiT) scheme?

The Feed-in Tariff scheme was introduced in April 2010 in order to incentivise the development of small-scale renewable generation from decentralised energy solutions such as solar photovoltaics (PV), wind, hydro, anaerobic digestion, and micro Combined Heat and Power (CHP). Generators were paid a fixed rate determined by the Government, which varied by technology and scale.

Payments to the small-scale generators were made quarterly by FiT-licensed suppliers and recovered from all consumers. A levelisation process also took place every quarter, as not all suppliers were required to offer FiTs and their exposure to the scheme varied.

 

The Government response

The response from the Government argues that the closure of the FiT scheme represents their “desire to move towards fairer, cost reflective pricing and the continued drive to minimise support costs on consumers”, adding that the current scheme does not support the vision set out in either the Industrial Strategy or the Clean Growth Strategy.

The scheme will close in full to new applications from 31 March 2019, subject to the time-limited extensions and grace period.

The Government has decided to provide a 12-month grace period for “Renewals Obligation Order Feed-In Tariff (ROO-FiT) scale” (all hydro and anaerobic digestion, solar PV, and wind with a declared net capacity over 50kW) installations that apply for preliminary accreditation on or before the cut-off date, are accepted into the cap, and then suffer grid and/or radar delay beyond their control. This means they are unable to accredit during their preliminary accreditation validity period.

It’s also been decided that projects in oversubscribed deployments caps at the close of the scheme will not be eligible for either generation or export tariff payments under the scheme, and so Ofgem will not grant them preliminary or full accreditation.

 

How will this impact you?

The results of these closures will mean that anyone that adds solar generation from April 2019 will not be paid for any excess power that is exported to the grid. These changes will not affect the circa 800,000 homes that have already solar panels fitted since the Feed-in Tariff scheme launched in 2010.

The Government is reportedly preparing to announce a market-based replacement to the export tariff early in the New Year, which would see new rules on how suppliers could purchase the excess power.

However, there will likely be a gap between the closure of the Tariff and the implementation of any new plans, meaning any new solar generators will be affected during this time.

 

We can help you realise the benefits of decentralised energy

Solutions such as Solar, Battery Storage, and Combined Heat & Power (CHP) can be an integral part of your wider energy strategy, as well as generate additional revenue through lucrative Demand Side Response (DSR) schemes.

To find out how, visit our webpage, call us on 01527 511 757, or email info@eic.co.uk.