Feed-in Tariff and Smart Export Guarantee

Understanding the UK's Feed-in Tariff (FiT) and the Smart Export Guarantee (SEG) is crucial for homeowners generating renewable energy. The FiT scheme, launched in 2010, encouraged small-scale renewable electricity generation but closed to new applications in 2019, making way for the SEG. This transition empowers homeowners with greater control and capability over their renewable energy, aligning with a vision for a future where energy is abundant and managed with ease.

Generating your own renewable energy is a smart move for your home and the planet. Fuse Energy supports homeowners in making the most of their energy, whether it's through smart tariffs or understanding export payments. Click here to switch to Fuse Energy today.

Understanding the Feed-in Tariff (FiT)

What was the Feed-in Tariff scheme?

The Feed-in Tariff (FiT) scheme was a UK government initiative introduced in April 2010 to support and accelerate the uptake of small-scale renewable and low-carbon electricity generation. It aimed to incentivise homeowners and businesses to install technologies like solar panels, wind turbines, and hydropower by providing payments for the electricity they generated and exported to the grid.

How did the FiT scheme operate?

Under the FiT scheme, participants received two main types of payments:

• Generation payments: A fixed rate for every unit (kilowatt-hour, kWh) of electricity generated by their accredited renewable system, regardless of whether it was used on-site or exported. These rates were typically guaranteed for 20 years and were often index-linked, providing a stable income stream.
• Export payments: An additional payment for each unit of electricity exported back to the National Grid. This was often based on an assumed export rate of 50% of generated electricity if an export meter was not installed, or on actual readings if one was.

These payments were made by licensed energy suppliers, who were mandated by the energy regulator, Ofgem, to administer the scheme.

The closure of FiT and the introduction of SEG

When did the Feed-in Tariff scheme close?

The Feed-in Tariff scheme closed to new applications on 31 March 2019. This means that installations commissioned after this date are not eligible to join the FiT scheme. However, existing FiT contracts continue to receive payments under their original terms.

Why did the government replace FiT?

The government replaced the FiT scheme due to the decreasing cost of renewable energy technologies and the increasing maturity of the small-scale generation market. The original FiT rates, designed to kickstart the industry, became less necessary as solar panels and other systems became more affordable. The policy rationale shifted towards a market-led approach, encouraging competition among energy suppliers to offer export tariffs. This transition aimed to ensure that payments for exported electricity reflected market value more closely, while still supporting renewable generation.

Introducing the Smart Export Guarantee (SEG)

The SEG came into effect on 1 January 2020, replacing the FiT scheme for new installations. The SEG mandates that all licensed electricity suppliers with over 150,000 domestic customers must offer an export tariff to small-scale low-carbon generators. Unlike FiT, the SEG focuses solely on payments for exported electricity, requiring a smart meter to accurately measure what is sent back to the grid.

Navigating the Smart Export Guarantee (SEG)

How does the Smart Export Guarantee work?

The SEG provides payments to homeowners for the renewable electricity they generate and export to the National Grid. To qualify, you need an eligible renewable energy system (like solar PV or wind turbines) and a smart meter that can send accurate export readings to your energy supplier. Suppliers offer various SEG tariffs, and you can choose the one that best suits your needs, often from a different company than your import electricity supplier.

Eligibility for SEG tariffs

To be eligible for SEG payments, your renewable energy system must:

• Have a total installed capacity of up to 5 MW (or up to 50 kW for micro-CHP).
• Be certified under the Microgeneration Certification Scheme (MCS) or an equivalent scheme.
• Have a smart meter installed and functioning to accurately measure your exported electricity.
• Be located in Great Britain.

You do not need to buy your electricity from the same supplier you choose for your SEG tariff, allowing you to shop around for the best export rate.

Comparing SEG tariffs and providers

SEG tariffs vary significantly between different energy suppliers. Some offer fixed rates per kWh, while others provide variable rates that might change with market conditions or time of day. It is essential to compare tariffs from all available licensed energy suppliers to maximise your earnings. Factors to consider include the unit rate, payment frequency, and any specific requirements, such as needing to be an import customer with them. Understanding your energy bills and how different tariffs work can help you make an informed decision.

FiT vs SEG: key differences for homeowners

Can you switch from FiT to SEG?

If you have an existing Feed-in Tariff contract, you generally cannot switch to the SEG without forfeiting your FiT payments. FiT contracts typically offer higher generation payments, which are usually more financially beneficial than SEG export rates alone. Switching would mean losing your generation payments, so it is rarely advisable for existing FiT customers.

Financial implications: FiT vs SEG rates

The financial implications of FiT versus SEG are distinct. FiT offered both generation payments (for all electricity produced) and export payments, often at rates that were set higher to encourage early adoption. SEG, on the other hand, only pays for exported electricity, and the rates are determined by market competition among suppliers. While SEG offers a positive rate (above zero) for each unit exported, these rates are typically lower than the combined FiT payments. For new installations, SEG is the only option, but for existing generators, remaining on a FiT contract usually provides greater financial benefit.

The role of smart meters in SEG

Smart meters are fundamental to the SEG. Unlike the FiT scheme, which often used estimated export rates, SEG requires a smart meter to accurately measure the exact amount of electricity you export to the grid. This ensures you are paid precisely for what you contribute. For homeowners, a functioning smart meter is a prerequisite for receiving SEG payments and helps in managing energy usage more effectively.

Maximising your renewable energy export payments

Optimising export with battery storage and smart technology

To maximise your export payments under the SEG, consider integrating battery storage and smart home energy management systems. Battery storage allows you to store excess renewable energy generated during the day and either use it later when electricity prices are higher or export it during peak demand periods to earn more. Smart technology can automate these decisions, optimising your consumption and export patterns for the best financial return. For example, an average UK home uses around 2,700 kWh of electricity per year, meaning efficient management of your generated energy can significantly impact your savings and earnings.

Understanding tax implications for export payments

For most domestic generators, FiT and SEG payments are generally not subject to income tax, provided the generation is primarily for personal use and not a commercial enterprise. However, if you operate your renewable energy system as a business with the intention of making a profit, or if your generation capacity is very large, you may need to declare these payments to HMRC. It is always wise to consult a tax advisor for personalised guidance on your specific circumstances.

The future of homeowner energy generation and export

The transition from FiT to SEG marks an evolution in how homeowners interact with the energy grid. The future points towards a more dynamic, digital-first energy system where homeowners are active participants. Technologies like smart meters, battery storage, and vehicle-to-grid (V2G) charging will empower individuals to manage their energy more effectively, turning their homes into flexible energy hubs. This shift aligns with a vision of abundant energy, where homeowners can gain more control and value from their energy systems, making a "power play" with their renewable generation.

Frequently asked questions about feed and tariff

Who regulates the Feed-in Tariff and SEG?

Ofgem, the UK's energy regulator, is responsible for overseeing both the Feed-in Tariff (FiT) scheme and the SEG. Ofgem accredits installations under FiT and licenses energy suppliers to make payments, ensuring compliance with the regulations.

What if I have a legacy FiT meter?

If you have a legacy FiT meter, it will continue to be used for your FiT payments. These meters typically measure your generation, and some may also measure export. You do not need to replace it unless your FiT licensee advises otherwise. If you decide to move to SEG (which is generally not recommended for existing FiT customers), you would need a smart meter.

How do I get a Feed-in Tariff meter reading?

For FiT generation payments, you typically submit readings from your generation meter to your FiT licensee at regular intervals, often quarterly. The method for submitting a Feed-in Tariff meter reading varies by supplier but usually involves an online portal, email, or phone. For export payments under FiT, if you have an export meter, you would also submit readings from that; otherwise, an assumed export percentage (typically 50%) is used.

Making the most of your renewable energy generation and export payments is easier with a modern energy supplier. Fuse Energy offers clear pricing, real-time usage data, and 24/7 human customer support to help you manage your home's energy effectively. Our smart approach to energy means you can take control of your bills and contribute to a greener future.

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