Feed-in-Tariff
The Department for Business, Energy and Industrial Strategy (BEIS) recently unveiled that a new ‘Smart Export Guarantee’ will replace the current export tariff.
Set up in 2010, the feed-in-tariff was created to encourage domestic uptake of renewable energy technologies, such as solar panels, small scale wind turbines and micro-CHP boilers. It pays for both electricity generated (generation tariff) and some of the excess electricity exported to the grid (export tariff).
Solar PV accounts for 99% of the total number of installations supported by the feed-in tariff. Since 2010, the tariff has supported a total of 830,471 installations and generated a total capacity of 6.09GW. Around 560,000 households and small businesses currently receive feed-in tariff payments, totaling £1.2 billion a year.
However, as of April the 1st, the scheme will be closed to new applicants. If users are a current applicant, their chosen FiT licensee must have received their application for the accreditation by 31st March. Or, if you already receive the feed-in-tariffs, payments will continue as they are payable for up to 20 years, from the rate of issuing.
Smart Export Guarantee Scheme
A new payment scheme, the Smart Export Guarantee (SEG), is being developed by the government. Like the FiT, SEG will pay for electricity supplied to the grid (export tariff) but not for generated electricity. Payments will also be based on the actual amount of energy supplied rather than an estimate, and suppliers will have the flexibility to set their own prices and length of contracts for buying electricity from householders who generate it.
If renewable technology is installed after the feed-in tariff has closed, you’ll be able to apply for the SEG once it exists. However, you won’t be able to claim for electricity supplied to the grid in between the two schemes.
To fulfil payments based on actual energy supplied to the grid rather than estimates, SEG will utilize smart meters or retrofitted export meters for more accurate data transfer. Smarter monitoring will track energy prices half-hourly, so they will reflect the actual demands of the system and means tariffs can be more flexible.
Advantage includes:
- Flat rate tariff – paying the same amount for each unit of electricity supplied to the grid.
- Simple variable tariff – paying different rates at set times (eg evening or weekend).
- Advanced variable tariff – prices could change up to every half hour to reflect the cost of electricity in the wider system.
Rationale for Intervention
SEG is replacing the feed-in-tariff as a government incentive to move towards market-based solutions, cost reflective pricing and to improve the financial viability of installing domestic clean energy technologies.
Electricity generation has been a significant contributor to greenhouse gas emissions and government intervention has to be necessary to ensure market incentives are sufficient to meet the UK’s climate change commitments. The FIT scheme has been one of the key enablers in driving the uptake of a range of small-scale low-carbon electricity technologies, with over 6GW of low-carbon electricity deployed under the scheme.
As costs decline and new, smart technologies become accessible, market incentives are beginning to align with government objectives.
As the UK moves to a smarter and more efficient energy system, small-scale low carbon generators are likely to play a significant role. Therefore it’s important that a route to market for generators is established. The specific intervention considered in this case is the Smart Export Guarantee (SEG).
For more information on the Smart Export Guarantee, CLICK HERE to visit the government website.
Author: Ajeet Panesar
