Calls for reform of ‘flawed’ Smart Export Guarantee

The Department for Business, Energy & industrial Strategy (BEIS) has been urged to set a minimum price for the surplus electricity provided by small scale generators to the grid through the Smart Export Guarantee (SEG).

In a letter to BEIS secretary of state Kwasi Kwarteng, the chair of the environment audit committee Philip Dunne relayed concerns by community energy providers that the current operation of the SEG is “flawed”.

Under the SEG, which was introduced early last year to replace the scrapped Feed-in Tariffs, suppliers with more than 150,000 customers are legally required to offer terms of payment for the surplus power that new solar devices put on the grid.

However, the rules of the scheme do not dictate a minimum price that suppliers must pay for this surplus electricity.

Dunne writes that the lack of both this minimum export price and long-term certainty beyond 12-month periods puts the community energy sector at a disadvantage to larger renewable energy projects, which receive Contracts for Difference.

The committee recommends that BEIS “swiftly” introduces a minimum SEG floor price above zero and extends the guarantee on the energy export price.

Dunne also writes that grid connection costs and access charges can be too high for small community groups and do not account for the wider decarbonisation benefits that the projects bring to their communities compared to commercial renewable developments.

The letter recommends that the government should remove the regulatory barriers to allow community energy projects to sell their energy to their local communities, including the creation of a new “right to local supply”, as exists in the Netherlands.

“Local energy markets will play an important role in the future energy network, balancing supply and demand at a community level and building energy resilience by harnessing edge-of-the-grid potential.”

The letter also calls on Ofgem to improve its support of community-led renewable energy projects and for adjustments to the national planning policy to allow councils to prioritise such developments.

Dunne said: “Net zero Britain requires us to change our behaviour and adapt to a low-carbon lifestyle. Community energy can help achieve this – not only powering homes and businesses up and down the country but by engaging local citizens on the benefits of renewable energy and – in many ways – how we can do our bit to help keep the lights on ourselves.

“I urge the government to consider increasing the role community energy can play, and how we can learn from countries like the Netherlands on how to make it work.”