I am pleased to announce I will be laying legislation today to introduce a new supplier-led subsidy free Smart Export Guarantee (SEG). This will ensure that homes and businesses, who export their surplus low carbon electricity to the grid, will be able to receive payment from their energy suppliers. The SEG will come into force in Great Britain from the end of December this year.
The UK has made substantial progress in building a successful renewables industry as part of our move to a low carbon economy. In 2017, businesses active in the low carbon and renewable energy economy generated £44.5 billion in turnover and employed an estimated 209,500 full-time equivalent employees. Our modern Industrial Strategy sets out how the Government will ensure that the UK continues to benefit from the transition to a low carbon economy.
Developments in technology and the industry, supported by the Government, have driven down the cost of small-scale low carbon electricity generation to a position where some projects can now be built without subsidy. This is in line with our vision that electricity generation should be competitive, and market based.
However, from responses in our call for evidence in July last year2, it was clear small-scale generators can struggle to access the electricity market, while some larger suppliers are unfamiliar with smaller players in the sector. Responses suggested that following the closure of the Feed in Tariffs Scheme (FITs), some form of Government intervention remains necessary while markets for small-scale low carbon generation are still emerging.
The SEG will address this by requiring licensed electricity suppliers to offer a tariff for electricity exported by small scale low carbon generators, such as households with solar panels. This means small scale generators will be able to fully participate in the UK electricity market. This new requirement will apply to suppliers with more than 150,000 domestic customers. Other smaller suppliers can also voluntarily participate in the SEG.
Other than a few core conditions, such as payments having to always be greater than zero, this policy is market-led. The rates paid to the small power producers will be determined by the market rather than set by Government. This is unlike the FITs, which was funded through levies on consumers’ energy bills.
The SEG will complement the deployment of smart, flexible technologies such as storage and demand- side response. A smart and flexible system could save £17-40 billion across the electricity system to 20503. The policy will encourage electricity to be sold at the times when it is most needed and market prices are highest.
Previously, the amount of electricity exported by small scale generators has often been unmeasured and flowed to the grid without metering. The rollout of smart meters allows a more precise approach, which in turn will make it easier to manage the electricity system as the number of small scale generators, as well as electric vehicles and small-scale storage batteries, increases.