Government consults on Smart Export Guarantee (SEG) to replace Feed-in Tariff regime

The UK Government has carried out a consultation process on its proposed Smart Export Guarantee (SEG) as a support mechanism for renewable energy schemes up to 5MW, following the closure of the Feed-in Tariff (FIT) regime.

The SEG is proposed to be a mandatory supplier-led route to market which would pay small-scale renewable generators for the electricity they export to the grid.

Supplier-led

The proposal is that large electricity suppliers (initially intended as those with over 250,000 domestic customers, but the consultation is considering reducing this threshold) would be obliged to offer generators a SEG, giving a price per kWh for exports to the grid. Small electricity suppliers could voluntarily opt to offer generators a SEG. Suppliers will be free to offer more than one tariff.

Payment levels

Whereas the FIT scheme involved standardised rates of payment to all applicable generators for each kWh, the SEG is proposed to be market-driven with each participating supplier free to decide on the amount it will offer by contract to pay per kWh and also whether the contract price per kWh will be fixed or variable (for example, different prices at different times of the day to reflect higher or lower demand times). With the participating suppliers being obliged to purchase electricity from small-scale renewable generators, they will have to offer prices that are attractive enough to secure those purchases and, being market-led, it is hoped that this will lead to cost-reflective pricing which will promote efficiencies in production costs.

SEG contract duration

Each participating supplier will be free to decide the duration of the SEG contracts they offer to generators. 

Eligible technologies

The SEG is proposed to be open to all types of technologies currently eligible for the FIT scheme, up to 5MW in capacity. This will include onshore wind, AD, hydro and solar PV.

Why is it called a “Smart” Export Guarantee?

Electricity exported to the grid under a SEG will have to be metered with a half-hourly meter which will allow for time-specific electricity pricing. This should help to balance supply and demand by encouraging consumers to reduce use at peak times and shift use to lower demand times. This will help drive a smarter energy system which should also reduce the amount of spending needed to upgrade the capacity of the electricity grid to cope with demand peaks.

Co-location

Increasing use of energy storage (e.g. battery) as the technology becomes cheaper should allow generators to store energy and export it at times of higher demand/price. The Government intends that the SEG should also apply to export from storage devices (but is consulting on whether this should include export of “brown” electricity, namely where the storage device has been charged from the grid instead of from green energy).

Timing hiatus

The FIT scheme closes on 31 March 2019 (subject to some limited temporary exceptions) but, given that the SEG proposals won’t be finalised and rolled out by then, there will be a gap period which will leave any proposed small-scale renewable energy projects schemes in limbo until the new mechanism is in place.  Watch this space!

Renewable Energy

Our lawyers assist clients with onshore wind projects, hydro and solar energy, and biomass, providing advice and insight into insider knowledge and practical know-how.

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