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Solar panels and renewable energy: what are the costs and rewards in 2020?
Find out how much solar panels cost and how much could you get paid for generating renewable electricity through the Smart Export Guarantee
Big energy companies have to offer tariffs to pay customers who put renewable electricity they have generated into the grid, in a scheme known as the Smart Export Guarantee (SEG). But some are paying over 10 times more than others.
This means your earnings could vary by more than £100 for the same amount of electricity, depending on which company you choose.
In addition, some firms will only pay for generated renewable electricity, while others will also buy electricity stored in a home battery, some of which may have originally come from the national grid.
We contacted 12 of the UK's biggest energy firms to find out more about their offers and reveal how much you could earn, which companies offer the highest SEG payments, and what types of renewable systems are eligible.
To help you decide whether solar panels and the SEG are right for you, we also reveal how much solar panels cost.
What is the Smart Export Guarantee for solar panels?
The Smart Export Guarantee pays households who generate renewable electricity for exporting any that they don't use to the national grid.
It doesn't just apply to solar panels. Other eligible low-carbon technologies include:
wind
hydro
micro combined heat and power
anaerobic digestion.
To qualify, your renewable electricity installation must be less than 5MW (50kW for micro-CHP) and be certified (usually by the microgeneration certification scheme). You will need a meter that can measure electricity export so that the company can pay you based on half-hourly readings.
If you don't already have a meter that can do this, you'll probably need a smart meter fitted. Find out more about getting a smart meter installed.
Finding the best electricity price
Unlike its predecessor, the feed-in tariff (see below), companies can set their own payment rates and contract lengths. The only rule is that payments must be greater than zero.
To help you choose, we've compared the SEG rates of the biggest energy firms, ranked by rate. Some companies offer more than one tariff, with different features.
Smart Export Guarantee export tariffs compared
With payment rates varying between 0.5p and 5.5p per kWh of electricity exported, the tariff you choose will have a big impact on how much you could earn.
The amount each household exports will vary but, for example, if you exported 1,500kWh of electricity in a year (for context, the average household uses around 3,100kWh per year), you could earn £82.50 with Eon's Fix & Export Exclusive tariff or Octopus Energy's Outgoing Fixed tariff
Utility Warehouse, on the other hand, would pay you just £7.50 for the same level of export.
As well as Octopus Energy's comparatively generous Outgoing Fixed tariff, it offers an 'Agile' tariff where the amount you receive fluctuates each day based on day-ahead wholesale prices. Octopus says this these typically vary between 4-10p/kWh.
While this may seem a riskier strategy than opting for a fixed tariff, Octopus claims that a customer with 4kWp of solar panels with battery storage could earn 50% more than with the same panels on a fixed rate.
Eon also offers two tariffs, one of which (Fix & Export Exclusive v1) pays a higher rate for those who use Eon for their solar panel installation.
Smart Export Guarantee tariff features
Companies' tariffs also vary by whether they are fixed or variable, how you'll be paid (cheque or bank transfer), payment frequency, and exit fees.
Some tariffs will pay for electricity stored in a home battery, while others won't. .
Fixed tariffs will pay the same rates throughout the length of the contract. The rates of variable tariffs can change, although companies must give you 30 days' notice.
Payments are based on actual amounts of electricity exported, so most companies say they won't pay unless they have received a meter reading.
If you pick a 12-month tariff, check what happens at the end of the contract. For example, at the end of EDF's Export+Earn tariff, your payments will stop unless you sign a new contract. Meanwhile, Eon and Ovo customers will be rolled onto a default tariff (which could have different rates) at the end of their deal if they take no action.
How much do solar panels cost?
If you're considering having solar panels installed, get several quotes before you sign a contract. To give you an idea of what to expect, and to make sure you don't pay too much, we teamed up with the Royal Institution of Chartered Surveyors (RICS) to find average prices for solar panels.
Including installation, prices vary between £2,920 and £15,500, depending on the size of system you require. The most common solar panel system size is between 3.6 and 4kWp, according to our survey of Which? members with solar panels in 2019.
Even with the most generous tariff, it would take a very (very) long time to repay the upfront cost of solar panels from the Smart Export Guarantee alone. But, of course, you also need to factor in the savings you'll make by using the renewable electricity solar panels generate, rather than buying electricity from your energy firm.
You have to apply to an SEG licensee to receive payments for exporting electricity. All electricity companies with more than 150,000 customers must be licensees. It's optional for smaller firms.
You do not have to use the same company that supplies your electricity. SEG licensees must make a tariff available to all eligible installations, not just those of their customers.
However some firms, including Shell and SSE, state they only pay you if you also buy your electricity from them. Ofgem told us: 'We are in contact with the electricity suppliers to ensure that they understand their SEG obligations.'
The SEG licensee should send you a contract and its terms and conditions. Check for details about:
switching your SEG supplier
your rights to end the contract
how to complain
how you will be paid
how often you will be paid.
If the company stops trading, your payments are not guaranteed.
Energy regulator Ofgem's guidance states: 'Any electricity exported between the point the contract from the previous SEG licensee stops and a new SEG contract is agreed with a new SEG licensee will not be the responsibility of the new SEG licensee'. You are responsible for setting up a new SEG tariff.
Can I get Smart Export Guarantee payments for electricity stored in my home battery?
Companies must pay for exported electricity that you have generated if you sign up for their SEG. Some customers also choose to install a battery to store electricity that they don't use. However, companies can choose whether or not to pay for stored electricity that customers later export.
For example, Octopus Energy pays for stored electricity that is later exported, whereas SSE will only pay for renewable electricity that you have generated.
In 2010, the feed-in tariff (FIT) scheme was introduced by the government to require larger energy companies to pay households (and other small generators) for renewable electricity they produced.
Payments made to those who signed up at the start of the scheme were (and are) very generous. Over time they reduced, and the scheme closed to new applicants at the end of March 2019. Those who already get FIT payments are not affected.
I get the feed-in tariff. Should I change to the Smart Export Guarantee?
You can receive either feed-in tariff export payments or Smart Export Guarantee payments, not both. So if you want to get SEG payments, you must opt out of receiving FIT export payments.
Most people who already receive the feed-in tariff are unlikely to earn more with SEG. However, this can depend on:
the rate of your FIT export payments
how much of your renewably generated electricity you use.
The FIT rate you get depends on when you signed up. Rates for those who signed up when FIT payments began are very substantial. For example, if your renewable system generates 3,000kWh in a year and you export 1,500kWh, your earnings could be around £1,600 per year with the original feed-in tariff rates, 20 times more than the current most generous SEG tariff.
However, feed-in tariff rates last year weren't nearly so generous. Anyone who signed up to FIT then will only earn around £110 more per year for exporting 1,500kWh, compared with the highest fixed SEG rates.
But if you opted-out of receiving your FIT export tariff and signed up to one of the most generous SEG tariffs, you could earn a bit extra each year (see the blue bars in the graphic above).
Much of the difference is because of feed-in tariffs' payments structure. Generators are paid both for electricity generated, and excess electricity exported to the grid. SEG tariffs pay for exports only.
Ofgem says that companies will check the central feed-in tariff register to make sure that installations don't receive both payments.
However, you are allowed to receive both smart export guarantee payments and renewable heat incentive (RHI) payments. Find out more about the renewable heat incentive.
