Is the Smart Export Guarantee Failing Solar Panel Owners?

The Eco Experts

The Smart Export Guarantee makes suppliers pay for excess solar energy

But they only pay 13% of the energy’s value

The next price cap rise is set to reduce that figure to 7%

The Smart Export Guarantee (SEG) is a good idea.

It forces suppliers to financially reward consumers who send their excess renewable energy back to the National Grid, which makes the UK’s electricity greener and cheaper.

However, its fatal flaw is that companies can pay any amount for your energy.

And with the energy price cap set to hit £3,549 in October, pushing the price of electricity up by 69%, will your SEG payments reflect this?

couple looking sad at their bills

How much is your solar power worth?

Electricity is currently worth 28.3p per kWh, rising to 51.8p per kWh in October.

The solar energy which more than a million UK homes generate is worth exactly the same.

As a result, the average three-bedroom household – let’s call them the Taylors – can cut their annual £844 electricity bill to the National Grid in half by getting solar panels.

And if the Taylors get a solar battery, they can use almost all the electricity their panels generate, and save around £844.

A solar battery costs £4,500 on average though, and with the cost of living skyrocketing, let’s say the Taylors can’t afford one right now. So what happens to their unused solar energy?

The Smart Export Guarantee guarantees them a certain amount of money for each kilowatt-hour (kWh) they send back to the Grid.

But under the terms of this government-backed initiative, suppliers can pay any price above zero for the Taylors’ solar power.

How much do energy suppliers think your solar power is worth?

Suddenly, when energy companies are buying electricity from their customers, the price of electricity is mysteriously seven times lower on average, costing just 3.9p per kWh.

The Taylors can move their electricity supply to Octopus and receive a market-high rate of 7.5p per kWh, but they’ll almost certainly pay a much higher electricity tariff than they’re currently on. Moving suppliers is a bad idea at the moment.

Tesla will pay them 11p per kWh, but to qualify for that rate, they must get a Powerwall 2 solar battery, which will set them back around £9,000.

The highest SEG rate they can get without switching energy suppliers or buying an expensive battery is ScottishPower’s 5.5p per kWh offering, which is still five times less than their electricity is worth.

The Taylors will save £82 per year with ScottishPower’s rate, but they’re being ripped off. Their solar power is worth £340 more than that.

It’s going to get worse

From October, the increased price cap will result in the Taylors paying £1,502 per year for electricity from the National Grid – more than double the £698 it cost them in 2019.

The Taylors have solar panels, so they can cut this amount in half.

But they’ll send the rest back to the grid for Smart Export Guarantee payments – and there’s no sign that suppliers will increase their rates.

We’ve contacted all 15 Smart Export Guarantee suppliers, and only two have said they plan to increase their rates.

So Energy said it “is currently reviewing Smart Export Guarantee (SEG) tariff pricing and will be increasing this in due course.”

And a spokesperson for EDF, which offers the second-lowest SEG rate, said: “We are currently in the process of increasing the SEG price available for EDF import customers, this is due to go live soon.”

This will only benefit customers who receive their electricity from EDF, but it’s still a welcome move.

Octopus told us that “upping the payments for our export customers again once we know what the new price cap will be is definitely an option we’re considering.”

Other suppliers were less enthusiastic.

Bulb said: “We’re continuing to monitor wholesale prices closely, including what that means for our SEG tariff. We’ll contact our customers if there are any changes.”

Shell said: “The tariff is kept under review, and any changes are communicated to customers.”

British Gas said: “As with all customer tariffs, our SEG tariffs will be reviewed periodically and may change in future.”

Utilita said: “We continue to keep our unit rates – which include distribution, transmission, metering, wholesale and the cost of producing energy – and the price we pay under the Smart Export Guarantee under review.”

And a ScottishPower representative told us we would find out if and when the company raised its SEG rate.

OVO refused to comment on behalf of its SSE arm or itself, while Tesla, E.ON, Pozitive, Utility Warehouse, and E have not responded to requests for comment.

What can be done?

Without any legal requirement, energy suppliers are technically free to pay solar panel owners as much – or little – as they want.

And they take advantage of that fact.

When it ended in March 2019, the Feed-in Tariff (FiT) paid solar panel owners 33% of their electricity’s value.

The 11 energy companies which are compelled to offer an SEG rate now pay 13% of the value you would gain by using your own solar power.

In October, that number will fall to just 7%.

Electricity’s wholesale price is currently above 25p per kWh, according to Ofgem. These suppliers pay just 3.8p per kWh, on average.

Why should companies pay you less than they pay other electricity suppliers?

We’re calling on the government to change the Smart Export Guarantee to force energy companies to pay households the full wholesale value of their solar power.

This will encourage more households to go solar and create free, green energy for the grid, which will reduce national energy prices and cut emissions at a time when both steps are dearly needed.

It’s clear too that the UK doesn’t think the government is doing enough to help with energy bills in general, as our 2023 National Home Energy Survey revealed. It showed that 76% of Brits didn’t think the UK government was doing enough to support with rising energy bills. 

Written by:
josh jackman
Josh has written about eco-friendly home improvements and climate change for the past four years. His work has been displayed on the front page of the Financial Times, he's been interviewed by BBC One's Rip-Off Britain, and he regularly features in The Telegraph and on BBC Radio.
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