Can the ‘Smart Export Guarantee’ and complementary technologies continue the solar trend despite an axe to the feed-in tariff?
There’s no doubt that solar photovoltaic (PV) panels represent a huge chunk of renewable energy generation in the UK. In 2018, 3.9% of total energy consumption was generated by PV panels. The UK is the 3rd highest generator of solar energy in the EU, behind Italy and Germany, and the 6th worldwide (behind Japan, USA and China). Primarily, this is a result of falling costs as the technology becomes more established.
In 2010, the average cost for a 4-kilowatt (KW) PV array was between £12,000 and £14,000, whereas today it’s £6,000. However, despite this, recent decisions taken by the current government have thrown the industry into jeopardy.
The Feed-In Tariff (FIT) was a government scheme that ensured consumers with renewable technologies received a fixed payment for both energy generated, and energy they exported back to the grid. The generation tariff was based on the assessed annual system output, and export tariff of 5.38p/kWh paid based on the assumed export of 50% of electricity generated back to the grid, regardless of actual export levels.
As of April 2019, the scheme was discontinued by the current government as it “did not align with the governments industrial strategy”, leaving prospective solar panel owners in turmoil. While it did not affect the ~800,000 homes who had installed PV since the scheme was introduced in 2010, with no replacement scheme in place new solar panel owners were facing the prospect of giving away excess solar energy for free.
However, upon consultation with the industry, the department for business, energy and industrial strategy have decided to introduce a new scheme.
Smart Export Guarantee
The Smart Export Guarantee (SEG) is a new scheme that is being introduced by the government from January 2020. It affects owners of renewable technologies with a capacity of up to 5 megawatts (MW) and is dependent on whether their main energy provider has over 150,000 customers. Technically, there is no right to receiving the payment if you were to use a very small utility company, however smaller utility companies might offer competitive tariffs in a bid to attract customers.
It is similar to the FIT in the fact that it will pay consumers for the energy they export back to the grid; however, it differs by paying a minimum rate per unit of energy rather than a fixed tariff dependent on the number of panels. In theory, this is meant to benefit small-scale renewable energy exporters as it will naturally allow the industry to become more market-oriented rather than subsidised.
Anyone installing solar panels between the end of the FIT (1st April 2019) and the start of the SEG in 2020 is eligible for the scheme, providing the installation is Microgeneration Certification Scheme (MCS) certified. Although at the early stages, the hope is that once the scheme is fully up and running it will be more generous than the FIT.
The first export tariff was launched in the UK on May 1st 2019 by Octopus Energy under the name “Outgoing Octopus” and offers a fixed rate of 5.5p per kWh (0.26p higher than the FIT) or a dynamic rate which changes every half hour and varies based on current demand. This, coupled with the continuing decrease in the cost of solar panels and an uptake in complementary technologies may represent a very appealing prospect for future clean energy exporters.
Complementary technologies – Solar batteries
One solution to the challenges faced by the industry could be solar batteries. These boiler-sized boxes can be installed in houses with a solar array, and can typically hold between 2 and 13 kWh at any one time. They offer great utility to PV owners in the UK, as unpredictable weather conditions often cause uncertainty about consistent power generation.
“The UK will need as many as 20 million ‘mini power stations’ to meet its target of net zero energy by 2050” Dr Andrew Crossland, an engineer with MCS’ Batter Installation Standard division has claimed. However, despite this, the UK government are set to increase the VAT for home solar-battery systems from 5% to 20%. All the while home coal supplies will continue to receive the 5% VAT rate. This is in direct contradiction to the governments ambition, and could push the take up of solar-battery systems back by years.
In spite of reduced government incentives for renewable technologies, the industry looks set to continue its growth as the technology develops in three areas:
1. Safety – It’s estimated that around one in 10 million lithium-ion batteries will fail in their lifetime at the cell level. However, poor installation and inadequate battery management systems (BMS) can magnify the risks.
Reputation is a huge driver of the development of the industry, and as the world becomes ever more connected through the internet, the quality of a company’s product and installation standards could be the difference between success and failure. This importance placed on safety standards will incentivise the whole industry to continue driving up standards.
2. Software – New energy management systems are using complex algorithms and artificial intelligence (AI) techniques to assess and manage individual home solar and storage. Through the use of data generated from smart meters, energy providers are able to monitor energy use in real-time, and can optimise delivery to provide consumers with the cheapest energy possible at any given time.
For example, Social Energy have created a system that dynamically manages energy supply every 5 minutes, enabling users to charge their solar battery using grid power when the price is low, and sell their self-generated power back to the grid when demand is high.
In short, this could produce the tantalising effect of making solar and storage systems so economical, they’d pay for themselves.This type of technology has the potential to radically enhance the effectiveness of the systems it manages, and could cause a shift in market share towards independent suppliers and away from the “big six”. However, for this type of technology is to become the mainstream a radical sea change in consumer behaviour is required.
3. Cost – In 2010 when the FIT was introduced, the cost of 4 kW PV panels was roughly £13,000. Today however, a homeowner can buy a 4-kW PV array and 4 kWh solar battery for around £8500. This showcases a dramatic reduction in the cost of renewable energy system. Furthermore, the efficiency of PV panels has markedly improved as well, from around 4.11% on average in 2010, to 4.90%. In essence, this gives the consumer more energy for less money. If renewable technologies continue the trend of decreasing cost as the technology becomes more advanced, they will present a more viable option for energy delivery to consumers, and as such the uptake will be greater.
If the UK is to meet it’s target of being of being net-zero carbon by 2050, renewable energy systems for private homes must be embraced by the mainstream. It is uncertain how much damage has been caused by the scrapping of the Feed-in Tariff, however new legislation such as the Smart Export Guarantee give hope that it will be kept to a minimum.
Despite changes to UK legislation and the tax rate for renewables, the industry as a whole shows no sign of slowing down. Indeed, the charge of innovation is picking up pace, with solar systems providing safer, more efficient power at an increasingly lower price. Coupled with an uptake in complementary technologies such as solar batteries and electric cars, solar technology could become the primary method of energy generation in the future.
In summary, widescale uptake of renewable technology seems inevitable; it’s only a matter of time. Currently due to high start-up costs a simple payback for a PV and battery system is unlikely. However, with continuing reductions in panel and battery costs, anything is possible in the future. Once consumers can be convinced of a system’s safety and efficiency, solar systems will likely become the norm and assist with meeting the UK’s net zero ambitions to address the fight against climate change. However, the biggest obstacle remains the payback time for renewable systems.
Time will tell whether the trend in falling costs for panels and potentially increasing revenue for energy exports will account for the high start-up costs, however the necessity for this hurdle to be overcome has never been greater. With ambition and innovation, it is possible to achieve this goal.
Written by Ben Westall, Graduate Sustainability Consultant
- Greenmatch: How Popular Are Solar Panels in the UK?
- Naked Solar: The Feed in Tariff is dead. The Export Guarantee is born
- UK: The future for small-scale low-carbon generation: part A
- UK: Feed-in tariffs: get money for generating your own electricity
- Octopus Energy: Outgoing Power: Export Strength
- The Guardian: UK home solar power faces cloudy outlook as subsidies are axed
- The Guardian: Solar households expected to give away power to energy firms
- The Switch: Solar Power Generation in the UK: The Ultimate Guide 2018
- Energy Storage News: Battery safety: UK net zero success could depend on 20 million ‘mini power stations’
- Current: LONG READ – Power to the people: How solar and storage is helping topple the Big Six
- Tesla: How long will Powerwall last in an outage?