New energy scheme offers little financial guarantee

Landowners who are considering installing renewable energy systems must be aware that attractive financial returns are no longer guaranteed – so it’s vital to budget correctly.

According to independent power and energy specialist Roadnight Taylor, the new Smart Export Guarantee (SEG) – which supersedes the Feed-In Tariff (FiT) – does not set any base price for renewable electricity, and only ensures a payment of more than 0p/kWh for power exported to the grid. As a result, landowners need to take a much more considered approach to their investment.

“In the days of the FiT, farms and estates could put solar panels on the roof and get paid a subsidy for all generation as well as a guaranteed floor price for any electricity exported to the grid,” explains senior consultant Richard Palmer.

“Many had hoped that the new SEG would set a minimum price for export – like the FiT – but it has not done so. Instead, it only guarantees that operators will have access to a market and are paid more than 0p/kWh at all times of export.

“As such, the SEG is neither smart or guaranteed, it is not a replacement to the FiT and is arguably now only a secondary consideration,” he adds. “With no guaranteed payments, it is important that landowners now focus on sizing schemes to their site’s energy demand, minimise any surplus exported to the grid and pay close attention to tariff structures.”

Anyone interested in installing renewable technology should first analyse historic data from a half hourly meter or install half hourly metering/monitoring to profile demand, suggests Mr Palmer. They should then consider all existing generation assets before looking at the most suitable technology, whether that’s solar, wind, anaerobic digestion, battery storage or combined heat and power.

“Many operators with existing installations opted out of the FiT base price and instead achieved higher export prices through Power Purchase Agreements (PPAs),” he explains.  “This will still be a good option for those schemes of a suitable scale. But for small-scale operators on the SEG alone, the lack of a guaranteed price or contract length is a risk due to exposure to falling electricity wholesale markets and the potential lack of competition, leading to an under-valued export price.”

Any new renewable installation or addition to existing schemes after 31 March 2019 will not be eligible for the FiT, but should ideally be built to comply with the SEG so that operators can access the available markets. The SEG applies to the main renewable technologies, up to 5MW, subject to eligibility criteria including a requirement to meter half hourly. The scheme comes into effect from 1 January 2020 with the full range of SEG tariffs being available from this date.

“There are still opportunities to significantly reduce electricity bills through small-scale renewable projects,” says Mr Palmer. “But there needs to be a change in mindset across the industry – too many developers are recommending unsuitably large installations, which will never deliver decent returns and may potentially create significant losses. There is no one-size fits all any more – it’s vital to undertake a professional strategic review of a business’s energy demands and tailor the solution to fit.”

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About The Author

John Swire - Deputy editor of Agronomist and Arable Farmer as well as responsibility for the Agronomist and Arable Farmer and Farm Business websites. After 17 years milking cows on the family farm John started writing about agriculture in 1998 and has since written for a variety of publications and has developed a wide circle of contacts within the industry. When not working John is a season ticket holder at Stoke City and also of late has become a fitness freak, listing cycling, swimming and walking as his exercises of choice.