Government release future plans for small-scale low-carbon generation

Government release future plans for small-scale low-carbon generation

The Department for Business, Energy and Industrial Strategy (BEIS) has revealed plans for legislation for a new scheme. The scheme will require energy firms to provide tariffs which enable small-scale low-carbon generators to export any unused energy for financial incentive.

A replacement for FiT

The end of 2018 saw the Government confirm plans to close the Feed-in-Tariff (FiT) scheme to new generators from 31 March 2019. The closure of the scheme represents their “desire to move towards fairer, cost reflective pricing and the continued drive to minimise support costs on consumers.”

The scheme was originally introduced in April 2010 in order to incentivise the development of small-scale renewable generation from decentralised energy solutions such as solar photovoltaics (PV), wind, hydro, anaerobic digestion, and micro Combined Heat and Power (CHP). Generators were paid a fixed rate determined by the Government, which varied by technology and scale.

Smart Export Guarantee

With the closure of the FiT scheme, routes to the market for exported electricity are currently limited, with a focus on larger capacity generators. As a result, the Government is exploring new arrangements for small-scale low-carbon generators.

The consultation is on a mandatory supplier-led route to market: the Smart Export Guarantee (SEG). Under this, government would legislate for suppliers to pay small-scale low-carbon generators for electricity exported to the grid. Payment would be available to all technologies currently eligible for the scheme, up to 5MW in capacity and would be based on the following design:

  • A BEIS mandate that larger electricity suppliers (more than 250,000 domestic electricity supply customers) offer small-scale generators a price per kWh for the electricity they export to the grid. Smaller suppliers would be able to opt to voluntarily provide a SEG tariff, but must adhere to the rules and guidance associated with the SEG.
  • Suppliers would determine the tariff per kWh for remuneration, and the length of the contract.
  • Mandated suppliers would be obliged to provide at least one export tariff.
  • Remuneration must be greater than zero and at times of negative pricing generators must not be required to remunerate suppliers for electricity exported to the grid.
  • Electricity exported to the grid from eligible generators must be metered – for domestic installations we expect smart meters to enable this.
  • No levelisation of costs is proposed but suppliers providing the SEG should be able to account for their administration costs in the setting of the tariff levels.
  • Suppliers must register eligible installations for the settlement process and settle in accordance with the requirements in the Balancing and Settlement Code (BSC).

How will this impact you?

There is no current timeframe for the implementation of the scheme. Under the current plans, suppliers will be responsible for choosing the price they offer.

The Government has outlined that they do not want to take a role in the price setting, meaning that there is currently no floor price in place. It is yet to be seen whether this results in a fair price for exported electricity.

The consultation is scheduled to close on 5 March 2019.

James Shaw

Posted by on Monday, the 14. January at 12.23

James Shaw joined the Market Intelligence team at Utilitywise in 2018 as a Graduate Market Intelligence and Policy Analyst. James has a master’s degree in Energy Engineering with Environmental Management from the University of East Anglia.