Smart export guarantee six months on: how much money can you make from solar panels?

If you produce excess electricity from solar panels or other renewable energy sources, the government-backed smart export guarantee (SEG) means that you'll be compensated for electricity you put back into the grid.

You're most likely to be able to benefit from this if you have solar panels, but the home production of renewable energy from wind, hyro, micro combined heat and power or anaerobic digestion is also eligible.

To take advantage of the scheme, you must sign up to a dedicated SEG tariff. The energy supplier you choose will set the rate paid for the electricity you export; some deals are much better than others, so be sure to shop around.

Here, we look at the difference between the best and the worst-paying SEG tariffs on the market, plus how Shell's new solar storage tariff - which offers discounts on your bill in exchange for exports - compares.

Thinking of buying solar panels? Check out our reviews of the best solar panel brands.

SEG vs feed-in tariffs

The SEG replaced the previous feed-in tariff (FIT), which is no longer available to new customers. While both schemes reward at-home electricity production, there are a few key differences.

FIT tariffs

• Funded by a levy on all energy bills.
• Home electricity production paid for at a rate set by energy regulator Ofgem, so no need to shop around.
• Compensated you for all home electricity produced, whether or not it was fed back into the National Grid. Compensation for generation alone and for exports worked slightly differently - visit our FIT guide for more details.

SEG tariffs

• Individual energy companies pay home electricity producers directly for the electricity they feed into the National Grid
• Focuses on rewarding those who feed electricity into the grid so it's available for others to use.
• Typically less generous than FIT payments; if you're an existing customer of a FIT tariff, we recommend staying on it until your contract ends rather than switching to an SEG tariff.

SEG tariffs compared

The SEG came into force in January 2020. All energy companies with more than 150,000 customers must offer an SEG tariff but it's optional for smaller companies.

With private companies now controlling the prices of SEG tariffs, it's no surprise that what you get back for your excess energy production varies significantly between tariffs.

Data from the Solar Trade Association (STA) shows that the three best-value tariffs will pay you more than five times times more for the energy you produce than the worst-value tariff.

Social Energy pays 5.6p/kWh, while Octopus and Eon both offer fixed tariffs paying 5.5p/kWh. In contrast, the lowest-paying company pays just 1p/kWh - although this is an increase from the dismal 0.5p/kWh that was the worst on offer in January 2020.

Depending on how much you're able to export, those rates could make a substantial difference to how much you could earn. A household with a fairly typical solar panel set-up* could earn £69 more a year (£84 vs £15) with the highest-paying tariff rather than the lowest-paying.

The STA maintains a list of SEG tariffs here.

There's lots to consider when deciding which SEG tariff is right for you, so read our guide for more information on the Smart Export Guarantee.

Shell's new seasonal solar storage tariff

Shell Energy recently launched a tariff that differs slightly from SEG tariffs.

Instead of directly paying you for the electricity you export to the grid, you earn credits for energy exports during the summer months and are then able to get a discount of up to £150 on your winter energy bills.

Unlike the SEG, it's targeted solely at solar-panel owners.

Shell is marketing it as a solution to at-home energy waste, but buying into this tariff has some significant costs. Notably, you have to own a SonnenBatterie to store solar energy.

Installing a solar panel battery alongside your solar panels has advantages, as it lets you capture electricity so you can use it at another time, maximising the benefits of having solar panels in the first place. However,SonnenBatteries are among the pricier home energy storage batteries on the market, starting from £6,499.

Read more about solar panel batteries in our guide.

As well as this, the import tariff Shell offers (so you can buy gas, and any electricity you need when the amount you generate from your solar panels isn't enough) is relatively expensive, priced at £1,016 a year for a household that uses a medium amount of energy. That's only an £111 saving on the energy price cap for customers on a standard or default tariff, which limits how much suppliers can charge per unit of energy.

That said, Shell says customers will be able to get up to £150 off their winter energy bills, which is probably more money than most solar panel-owners could expect to make by selling their energy to another company using the SEG.

The intention of the tariff is that those on the tariff will produce up to 75% of their own electricity, but anyone buying in should be awar that you're likely to be paying more than you need for your gas and for any electricity you have to import.

Can you earn back the cost of your solar panels with an SEG tariff?

Solar panels are expensive, and SEG tariffs won't recoup your investment in your new solar panels any time soon.

Even a small solar panel system will set you back around £3,000; it would probably take several decades to earn this back from SEG earnings alone.

While you shouldn't be under any illusion that selling electricity to the grid from your solar panels can make you a fortune, there are still many good reasons to get solar panels, including:

• Reducing your energy bills (combining energy savings with SEG earnings will cut the solar panel payback time significantly)
• Being self-sufficient by producing your own electricity (you'll also need an energy storage battery to make this a reality)
• Being a sustainable consumer by producing energy from renewable sources.

If you're still undecided, visit our guide to buying solar panels for more information.

*Based on tariffs available as of August 2020, for a 4kWp system exporting 1,500kWh of electricity to the grid in a year. For context, the average household uses 2,900kWh electricity in a year.