Smart Export Guarantee: How to choose the right tariff

Getting paid for generating electricity and sending it back to the grid. It sounds almost too good to be true, but that’s what you can look forward to if you install a bespoke PV solar and battery storage system at your home this year. Earning money from solar installations in the UK is linked to something called the Smart Export Guarantee (SEG), which replaced the previous Feed-in-Tariff (FIT) scheme.

What is the Smart Export Guarantee? 

The Smart Export Guarantee is a government-backed initiative introduced in early 2020 to incentivise homeowners to invest in renewable energy systems like solar. The SEG allows you to earn money for exporting renewable electricity you have generated and sent back to the National Grid. The amount you are paid depends on the SEG tariff you sign up for with an energy supplier. Each supplier offers different tariffs. 

The SEG ensures homeowners are guaranteed some form of payment for their excess electricity. Suppliers will set their own rates, but they must always be greater than 0p per kWh. While these rates are unlikely to match the price you pay for electricity from energy companies, our research found SEG rates have soared 100% in recent months. Octopus Energy, for example, now offers a very competitive 15p per kWh for exporting solar energy.

Who qualifies for the SEG scheme?  

Electricity suppliers with 150,000+ customers must offer at least one SEG tariff so small-scale electricity generators can sell excess electricity to recoup their initial costs. This helps you to drive a better return on investment (ROI) from installing solar panels. However, you will not be automatically enrolled into an SEG scheme after an installation. You must shop around and sign up for a tariff that best suits your needs. 

There are also specific eligibility requirements for the SEG scheme. This can change depending on the electricity supplier and tariff, but the general criteria are:

  • Capacity: The renewable energy system must have a capacity of up to 5MW.
  • Certification: The renewable energy system must be installed by a certified installer who is registered with a recognised accreditation scheme, such as the Microgeneration Certification Scheme (MCS).
  • Connection: The renewable energy system must be connected to the grid.
  • Metering: The renewable energy system must be fitted with a smart meter that is capable of recording the amount of energy generated and exported back to the grid.

What factors do I need to consider when selecting a tariff?

Before signing up for an SEG tariff, you must understand the costs and benefits involved. Many factors can affect how much you are paid to export excess energy. Homeowners often prefer higher export or lower import rates without actually analysing their electricity consumption. That’s why we recommend closely monitoring the amount of energy you are exporting and the amount of energy you are buying from the grid – from when you wake up to sundown, then during the evening and overnight to the morning.

Once you know how much electricity you are using during different periods of the day and how much electricity you are exporting, you can start the process of selecting a tariff that will be ideal for your specific circumstances and requirements. Remember, you can only export electricity when the household demand is met. When looking at tariffs, you should consider several important factors. These include:

Export rate

The export rate is the price you will be paid for every unit (kWh) of electricity you export to the grid. Different electricity suppliers offer different export rates, which can be either fixed or variable. It’s crucial to compare export rates from various suppliers and choose the one that offers the best value for your energy exports.

Fixed or flexible

SEG tariffs are usually either fixed or flexible. Fixed rates pay a set amount per kWh of electricity your export, while flexible rates pay different rates depending on the time of the day. For example, Octopus Energy’s recently launched Outgoing Agile tariff pays more when there is greater demand for electricity during peak hours in the evening. These flexible rates are usually linked to wholesale prices.

Import rate

The import rate is the price you pay for every unit (kWh) of electricity you consume from the grid. Some suppliers offer tariffs that combine the export and import rates, which can be more convenient and cost-effective for homeowners. 

Tariff structure

The tariff structure can vary between suppliers, and it’s essential to understand the details of each tariff before selecting one. Some tariffs may have minimum export requirements or standing charges, which can affect your earnings from the SEG scheme.

Payment frequency

Some tariffs pay out monthly, while others may pay out annually or at the end of the contract period. It’s important to consider how frequently you will receive payments and plan accordingly.

Length of contract

Some tariffs may require you to sign up for a fixed-term contract, ranging from one to three years or more. It’s important to consider the length of the contract and any associated fees or penalties for early termination. Most contracts are fixed for 12 months, and if you don’t cancel within 7 days after the end of that period, it will roll over for another 12 months. 

Supplier reputation

It’s important to consider the electricity supplier’s reputation and customer service record when selecting an SEG tariff. There are currently 15 suppliers that offer SEG tariffs which include major providers such as British Gas and EDF. Reading reviews and checking customer satisfaction ratings can help you make an informed decision about suppliers.

How much can I earn from exporting electricity? 

Signing up for a tariff and earning money from your exports is obviously recommended, as otherwise, you will send energy back to the grid for free without getting paid. Your earnings will depend on the SEG rate, energy usage, and household size. The average house uses 2,900 kWh of electricity per year. 

While you might think having a higher export percentage is beneficial, this is not always the case, as importing electricity from a supplier is more expensive due to higher rates. Using more energy you generate for household consumption will cut your energy bills significantly, but you will still benefit from selling excess electricity back to the grid.

Based on just a modest 5.5p kWh rate, you could earn more than £100 annually by exporting and save hundreds more on your bills with a 4kWp system that generates 3,410 kWh electricity each year. With energy bills still rising, this can dramatically reduce the burden of heating your home and powering your appliances.

How many batteries do I need?

A battery storage solution allows you to store the energy you generate rather than using it or exporting it immediately. This will enable you to use solar energy exactly when you need it most while taking advantage of off-peak rates available on flexible SEG tariffs. Vision2030 usually recommends pairing a battery storage system with your PV solar panels and inverter. The main benefits are:

  • Increased Energy Independence: Store excess solar energy during the day and use it at night.
  •  Improved Energy Resiliency: Provide backup power to keep critical appliances and systems running during a power outage or grid failure.
  •  Reduced Energy Costs: Use stored energy during peak demand hours to reduce electricity expenses
  •  Environmental Benefits: Further reduce your reliance on fossil fuels and contribute to a more sustainable future
  •  Increased Property Value: Further increase the resale value and make it more attractive to potential buyers 

Battery storage will also open up the power of grid trading, which allows you to sell the energy you have stored back to the grid when there is high demand during peak hours and then repurchase it during off-peak hours when it’s cheaper.

The benefits of batteries are clear then, but homeowners are often unsure about how many batteries they need to ensure their systems are running at maximum efficiency. At Vision2030, we often see customers that believe two batteries are better even when the system is working as intended with one. We only recommend buying more batteries when it’s worthwhile. We can help you here if you need help deciding on what course of action to take.

How do I find the best SEG rates? 

The rates that suppliers offer to export electricity to the grid can change at any time, so you should always confirm the exact price before selecting a tariff. You will find that many suppliers offer meagre rates, down to as little as 1p per kWh. This is a sign that they are just offering a tariff as an obligation and are not actually positioning themselves in the market as a competitive SEG provider. As of March 2023, the best-fixed tariff is Octopus Energy’s 15p rate, more than double the 6.4p figure from British Gas.

Vision2030 understands how vital the SEG scheme is when installing a PV solar and battery storage system, as it will dictate your savings and ROI. Our surveyors will help you understand your electricity needs and requirements when they first visit you for your free, no-obligation on-site survey. We also have an expert in-house sales and customer service team to advise you. Contact Vision2030 today for advice on the best SEG tariffs and to discuss how solar systems will enable you to regain control of your energy costs in 2023.  

How much could you save?