Those with any involvement in the renewables industry know that the Feed in Tariff (FiT) legislation ended in April of this year. The scheme was originally launched in the late 2000’s under the then Energy Minister Ed Miliband, and rewarded homes and businesses with installed solar panel apparatus for any electricity they fed back into the grid. The plan was to spark (get it?) up the use of renewables and ultimately reduce greenhouse gases by 34% by 2020 (compared with 1990 levels).
Those early birds who jumped at the sound of the initial fanfare were paid up to 43p per kWh fed into the grid on 20-25 year fixed rate contracts, beginning in 2011. Over the past decade however, as over 800,000 households and 28,000 businesses started their own sustainable microgeneration, the FiT became increasingly expensive for the government to fund and the rates were gradually reduced. With pro-fracking and nuclear lobbyists pushing for energy sector reform and increasing pressures to reduce Government expenditure, the Government finally removed the FiT in March, with the last to sign up receiving around 4p per kWh.
Obviously, this was met with criticism by many in the renewables industry who found it much harder to answer the common question, ‘how long do my panels take to pay for themselves?’. There has since been a fall in the sales of solar panels across the UK and a petition to bring it back. People often ask us about government incentives to go solar, but since the scheme’s end has been announced, our advice has been very limited and people who installed solar after March and feed unused electricity into the grid have done so for free. Some critics have even claimed that this policy vacuum and the consequential free export of microgenerated electricity was illegal.
However, in June the Government published its’ final proposals for the FiT replacement, the Smart Export Guarantee or “SEG”. Under the new legislation, medium to large electricity companies (rather than the Government) will pay their customers for the energy they export into the grid from solar PV that adheres to MCS standards. Unlike the FiT, there will be variation in the rates that customers are given based on how valuable the electricity is in relation to demand at certain times. For example, at peak times when demand is high, customers will be paid more for their electricity than at times when demand is low – this is the ‘smart’ bit.
The not so smart bit is the minimum renumeration you’ll get. The government has obligated energy companies to pay above zero – meaning that theoretically they could pay 1p per kWh. That said, in an increasingly competitive energy market, it’s unlikely that providers will stitch up their customers to this extent, and many will attempt to offer the ‘fairest’ deal. One (somewhat optimistic) possibility is that the providers will offer the wholesale price of the electricity as the baseline rate; tied to the market price of electricity, this is the price that they buy for at the source before selling it to you. The average market price for this was 6p/kWh in 2018, which could spell good things for those leaning towards going solar in 2020!
With potential clients unhappy at the possibility of throwing away energy, 2019 hasn’t been the most successful year for solar PV sales. As of 1st January 2020 onwards that will no longer be a worry, as new customers who installed grid-tied solar PV during the policy vacuum can register with their energy providers. Details are scarce at the minute as everyone struggles to make sense of the new plans, but although the days of 40p/kWh are long gone the most important thing is that consumers will still be rewarded for producing their own electricity. That’s better than nothing!
So, to recap:
FIT = Feed in Tariff SEG = Smart Export Guarantee
Grid Tied Solar = Having a grid–tied solar power system means your home’s solar panel system is linked to your local power utility company’s electrical grid