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UK eyes export payments for rooftop solar to replace part of feed-in tariff

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


UK eyes export payments for rooftop solar to replace part of feed-in tariff

A new government proposal would reward U.K. households and businesses with solar panels on their roofs for exporting power to the grid, replacing part of the payments set to be scrapped when the country closes its feed-in tariff scheme for small-scale renewable generators at the end of March.

To partly plug the hole left when the subsidy program is closed to new entrants, the government wants to implement a so-called smart export guarantee that pays rooftop solar and on-site wind farms, among others, for the power they provide back to the grid.

Under the new proposal, companies serving more than 250,000 electricity customers in the U.K. would be mandated to provide a per-kilowatt-hour price for exported power to small-scale generators, with remuneration available to all technologies under 5 MW capacity now covered by the feed-in tariff. Consumers would be expected to shop around for the best deal from energy suppliers.

The technologies covered under the old scheme also include hydropower, anaerobic digestion and combined-heat-and-power, but solar makes up 80% of the capacity that receives generation and export payments.

The replacement program "could help us to build a bridge to the smart energy system of the future, with consumers firmly at its heart — not only buying electricity but being guaranteed payments for excess electricity they can supply to the grid," said Claire Perry, the U.K.'s energy and clean growth minister.

Although the new program is likely to spur less solar deployment than a continuation of the feed-in tariff would have, the phasedown makes sense as solar costs continue to come down, said Jonathan Marshall, head of analysis at the Energy and Climate Intelligence Unit, a London-based nonprofit.

"It's the way the wholesale market is moving, it's a step in the right direction ... It opens up a space for more innovation and more companies to enter into this market and continue the smart power revolution if you will," Marshall said in an interview.

While the government could have avoided a period of uncertainty for prospective solar generators by announcing a replacement before closing the old program, Marshall also highlighted that the feed-in tariff was not ideal from an electricity system perspective.

"Some generators were getting hundreds of pounds to export to the grid in the middle of the day on a Sunday," when demand was close to zero, Marshall said.

The government said that combined with smart meters and battery storage, rooftop solar systems would be key to the future energy system in Britain, with the potential to work together with electric vehicles as well to store and sell power to the grid when demand is high. It is asking for market feedback on whether co-located batteries should also be paid under the new scheme for re-exporting electricity that was pulled from the grid, rather than charged from on-site generation.

The proposed legislation is undergoing a consultation until March 5. Given that time frame and the legislative procedure involved, it is unlikely the new scheme would be up and running in time to seamlessly replace the feed-in tariff from the beginning of April.

Feed-in tariff scheme participants are now paid quarterly by their energy supplier, both for the electricity they generate and export to the grid, with the costs ultimately recovered from consumers. The government had announced its intention to close the generation tariff years ago, but only proposed a simultaneous phase-out of the export tariff in July 2018, raising an outcry from industry groups.

The Renewable Energy Association welcomed the new proposal after warning in December 2018 that closing the feed-in tariff could significantly stall solar deployment.

"We strongly advocated for a market-based solution and are pleased this approach has been adopted," said James Court, the group's director of policy and external affairs. "It was clear that no-one should be asked to give away electricity for free."

As part of its consultation, the government admitted that in the face of the feed-in tariff closure, "an underdeveloped private market presents a significant barrier for small-scale generators being able to capture the value of the electricity they export."