Smart Export Guarantee: a briefing by SE24 volunteer Will Shanks

The Smart Export Guarantee is the new scheme that will ensure future SE24 projects will be able to sell unused electricity, while our partners continue to benefit from cheap energy. The scheme is replacing the Feed in Tariff (FiT, closed to new applicants March 2019), the public subsidy that directly paid solar panel owners, by forcing energy suppliers to offer energy tariffs that both buy and sell electricity. It is currently being rolled-out, and will be finalised by the end of 2019.

Key points

  • The scheme only applies to new sites. SE24’s existing sites will continue to earn money as before.
  • Energy suppliers can choose what kind of tariffs they offer their customers. Both fixed-price and flexible versions will be available, and you will be able to switch energy suppliers to exploit tariffs that work best for you.
  • SE24 will probably earn 5.2-5.5 p/kWh for its unused electricity. This is a fair price based on current market rates, but less than we earned under the FiT.
  • Sites must have a smart meter that lets the energy supplier measure how much unused energy is being exported to the grid.
  • Calculating the financial returns from new sites will probably be more difficult under the new scheme.

What is the Smart Export Guarantee?

The Smart Export Guarantee is the method by which small scale renewable energy generators looking to sell their excess power (such as SE24’s sites) will be able to access the market, through special tariffs offered by conventional energy suppliers that allow both buying and selling of electricity.

The government has left suppliers to design their own tariffs; the only requirement is a price floor of 0p/kWh (this can sometimes happen during times of overproduction of electricity, like in sunny and windy weather). Tariffs will come in various forms – Octopus Energy already offer both a fixed-price tariff (you are paid the same price for your electricity no matter what) and a flexible one (where you will earn more during times of high demand, and vice versa).

At this early stage, the prices that energy companies are paying appear fair at 5.2 – 5.4 p/kWh. This is compared to around 6 p/kWh for what an energy supplier pays for the electricity it then sells to us on the wholesale market.

Importantly, and unlike previous schemes, all participants must have a smart meter that will transmit half-hourly readings to the energy suppliers. If a site doesn’t already have one, the supplier will install a smart meter for free. The amount you earn for your electricity is based directly on these readings.

What does the new scheme mean for SE24?

The installation of smart meters can be seen as a hassle, and their nationwide roll-out has been fraught with public controversy. This could present difficulties during project appraisal, but in any case a smart meter is essential for anyone looking to become part of the energy transition.

From an SE24 investor’s perspective, the Smart Export Guarantee may be more risky than the FiT. Returns from the FiT were relatively easy to predict because they were based on estimates, before even commissioning a project. Thanks to smart meters, panel owners will now be paid precisely for the energy they export to the grid, and so predicting financial returns will require more sophisticated predictions and may be less reliable.

Globally, the change in scheme may render installing solar panels less attractive. Any new site will be paid approximately 5.4p p/kWh for exported electricity, against about 6.7 p/kWh under the FiT scheme. Nonetheless, with the right site, panel and tariff choices, partnered with intelligent analysis and fair prices from energy suppliers, SE24 will continue to be able to help make South East London a greener place.”

SE24 volunteer Will Shanks