What is the Smart Export Guarantee (SEG) scheme, and are you eligible? Below, we will explain what the SEG is, how you can benefit from it, and we will also talk about tariffs and answer other frequently asked questions. Let’s start with the obvious!

What is the SEG?

The Smart Export Guarantee scheme allows people who generate electricity using renewable systems, and export some to the grid, to be paid for it. It applies not just to homeowners, but also to businesses that use forms of renewable energy generation. Previously, homeowners with solar panels could become part of the Feed-In Tariff (FIT), and gain payment for energy exported to the grid. The FIT has now been discontinued, and SEG effectively replaces it. We will cover what to do if you are a part of the FIT scheme later on.

Who Is Eligible?

Homeowners who generate renewable electricity are eligible to join the SEG scheme. You will be paid for the surplus energy that returns to the grid. This differs to the FIT, in which the homeowner was paid for all the electricity generated. The following renewable sources are eligible for SEG:

  • Solar panels
  • Wind power
  • Hydro electric
  • Micro combined heat and power
  • Anaerobic digestion

While the Government has stated that all surplus renewable electricity will be paid for, it is not automatic. You need to register with a company to get your payment; if you don’t you’re missing out on what is rightfully yours! We will talk about tariffs and the companies offering them for SEG below. How much are you likely to earn? That’s our next question.

How Much Can I Earn?

With the FIT, which closed to new applications in March, 2019, the customer was paid for an estimated 50% of the electricity that they generated, meaning they effectively get electricity for free. This is no longer the case, unless you entered the FIT scheme before March, 2019. If you are already part of the FIT, you will still benefit from the original agreement.

Customers signing up for the SEG will be paid only for the surplus electricity that returns to the National Grid. How much you earn depends entirely upon your personal circumstances, how much energy your home produces and uses, and the tariff you are on.

As SEG is still in its early stages – it came into being at the start of 2020 – the tariffs available are limited. What you will find is that you are paid for the amount of kWh you export to the grid. This will likely be at a fixed rate to begin with. As the scheme becomes more widespread, it is possible the companies involved will introduce further tariffs, but for now, Ofgem will be keeping a close eye on the situation regards tariffs.

At the close of the FIT scheme, the rate of payment was 5.38p/kWh. You can use this as a guideline. However, looking at the current scheme, there is a vast difference between the tariffs on offer. The only stipulation is that payment must be more than zero. Recent research uncovered the lowers payment as 0.5p/kWh and the high as 5.5p/kWh – quite a considerable difference when take across a year.

Let’s talk about an example. The average household uses approximately 3100kWh of electricity in a given year. Assuming your home runs on a 4kWp system – which is a standard – and you export 1500kWh per year, you could be exporting around £80 worth of electricity and – as you are generating your own electricity – saving around £210 on your electricity bill. That’s an overall saving of almost £300. Bear in mind this model is based on the high rate tariff of 5.5p/kWh, and at an electricity price of 14.33p/kWh.

That’s quite a considerable saving. However, there is more to think about, as the following factors will influence the outcome of our example:

  • The rates for the tariff you choose
  • How much electricity you generate and use
  • The details of your tariff agreement regards time of day and so on
  • The cost of your electricity

There are also further considerations you need to think about. You can fit a home battery with some systems, which allows you to store electricity for later usage. Some companies will pay extra for stored electricity, but there will be specific rules. Others will not, as it’s entirely possible some of the stored energy comes from the grid.

The ideal situation is to sign up for a tariff that allows you to store electricity to export at high-rate times, so it’s worth checking the different options available. You also need to take into account the cost of a home battery, as they can be expensive. This brings us neatly to our next section, in which we talk about the choice of tariffs.

Should I Switch from FIT to SEG?

If you are already signed to the FIT scheme – which as we said is now closed to new applicants – you will have entered into a contract for as long as 20 years. That contract will be honoured. You can switch to SEG, but is it a wise idea?

When FIT was introduced it offered extremely attractive rates for customers. The baseline is that FIT estimated you would export 50% of the energy you generated to the grid. This is what you would be paid for. As it is, most homeowners found they were using more than 50%. This means you would be making money on using electricity.

The SEG scheme pays you for exactly the amount of electricity you feed into the grid. This is measured by half-hourly readings, taken automatically. You are more likely to be better off – in savings and earnings – if you remain on the FIT, rather than switching to SEG, but the choice is yours. Bear in mind also that the rates for FIT were set by the Government hence you get the same rate whoever you are selling to. SEG rates are set by the companies themselves and, as we mentioned above, can vary quite considerably.

The SEG scheme is aimed at people who are new to renewables, and is an excellent incentive for anyone who is looking at installing any of the systems that are listed above. It is certainly worth looking into SEG in more detail, and we recommend you research the different companies involved very carefully.

The current tariffs available will be added to in time as new companies become involved in the scheme, so don’t limit yourself to your current energy provider – have a look around and see who is offering the best deals. It’s worth your while, and you could find you are making major savings on your yearly energy expenditure before long.

Is there a Choice of Tariffs?

A number of different companies offer SEG tariffs, so it is certainly worth shopping around for the right deal. The Government stipulation is that energy companies who have more than 150,000 customers are obliged to offer an SEG tariff. Any smaller companies can choose to do so or otherwise.

It is believed that aside from traditional energy providers, there will be other companies who choose to enter the market for SEG. At the moment, a number of energy companies – Eon, Bulb and Octopus Energy notably – offer SEG tariffs, and more are set to come on board.

One confusing area of the SEG is that a company that is obliged to offer an SEG tariff must do so to all who have renewable sources, hence you can – should you wish – sell your surplus to a different company you buy your electricity from. This is worth bearing in mind when you are shopping for the right deal.

As the market is still evolving, there are currently two types of SEG tariff available – Fixed Rate, and Flexible Rate. Here’s a bit more detail about the differences:

Fixed Rate SEG Tariff – as the name implies, this sort of tariff involves the company paying for surplus energy at a set rate. The price will not vary thanks to time of day or any other influences, and will be a set rate per kWh.

Flexible Rate SEG Tariff – the value of available electricity can vary, hence a flexible rate tariff may mean that you get a different price depending upon the time that you sell your surplus at. High demand periods may see you get more for your electricity, and vice versa.

At the time of writing, the majority of SEG tariffs available are simple, fixed rate models. This may change as the market develops and more people sign up to SEG schemes. It is expected, for example, that multi-rate schemes may come into play. Talk to your energy supplier – and to others in the market for SEG – about their current available plans.

Remember that there are certain requirements you must meet if you are to be eligible for SEG, so make sure you check all the available information before you apply to join.

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