Solar Panels

Microgeneration: Homeowners should make money from their solar

Nov 21, 2018

A government announcement offers new hope to homeowners considering installing solar panels on their homes. Claire Perry, the Minister of State at the Department for Business, Energy and Industrial Strategy (BEIS) has stated that solar power should not be provided to the grid for free, and that the BEIS will be announcing the next steps for small-scale renewables soon.

This follows a proposal this summer which committed the government to shutting down the hugely successful ‘Feed-in Tariff’ scheme – which offers payments to people generating their own clean, green and renewable power at home. Will Vooght, Tonik’s Innovation and Business Strategy Lead, takes a look at what this - and the upcoming proposals - could mean for Tonik members.

What’s the Feed-in Tariff?

In 2018, almost 30% of the electricity mix came from renewable sources. This power is produced almost exclusively the by large-scale renewable generators – big wind, solar and hydro generating stations.

However, since the introduction of the Feed-in Tariff (FIT) scheme in 2010, we have seen a new-wave of over 900,000 distributed, small scale micro-power stations installed across the country – up from just hundreds before the scheme was introduced.

The FIT scheme guarantees a payment to generators for the total amount of electricity that’s produced by independent generators – delivering an attractive financial return on initial investment, which has been a core reason for this astronomic growth in the sector. These generators are producing electricity that’s mostly used on-site; powering homes and businesses by renewable electricity generated ‘behind the meter’ – the side of the owners’ property where electricity is used, and before the point at which the normal electricity grid connects.

The FIT makes two types of payments to generators – one, for all the electricity that they produce, and another nominal payment based on electricity that enters the grid. However, due to a really long list of very complex and expensive reasons – the electricity entering the grid isn’t currently metered and the value paid to generators is effectively estimated rather than based on real, metered energy flows.

What was the government proposing?

It has long been the government’s intention to remove the payment for all electricity produced, and since 2015 it has been proposing to do something to address the ‘exported’ electricity value of FIT.

However, in the summer consultation, BEIS stated that they were effectively removing both sets of payments to generators from April 2019, and that generators – normally small households – would need to ‘go to market’ to get the value that they’re delivering to the system. Sounds practical, right?

Well, not really. For a home generator to go to market and set up something called a Power Purchase Agreement (or PPA) – they’re effectively being treated and asked to take the same measures that a large offshore wind farm or large commercial solar farm would need to take in order to get paid for their electricity. And it’s really not straightforward to navigate, even for a massive generator.

What’s the challenge?

Even Tonik – though we really want to offer payments to these homeowners for their metered export electricity – wouldn’t be able to make this a straightforward process. There’s so much cost and complexity in setting up one of these PPAs that the simple administration of it would totally outweigh the payments made to generators. The upshot of all this being that newly installed rooftop solar would have nowhere to go with their electricity; effectively they’d be allowing all of their unused power to go back into the electricity grid for free.

What’s even more impactful is that this policy vacuum conflicts directly with EU legislation on the topic. The UK government is required to deliver a workable support scheme for microgenerators to “receive a remuneration, including where applicable through support schemes, for the self-generated renewable electricity they feed into the grid which reflects the market value”. This means newly installed renewable generators will be second class to all others in installed by our European neighbours. That’s something Tonik can’t stand for – and that’s why we’ve been engaging with the likes of the Solar Trade Association and other industry leaders on the Fair4Solar campaign, to make sure we don’t stop this industry dead in 2019.

We couldn’t be happier that the Minister’s seen sense and listened to the industry’s calls to reverse the proposals.

So, what next?

We don’t quite know – all that’s been said so far is that the government’s proposed approach is 'wrong' and that there’s a new proposal due out soon. Tonik will be closely engaging with whatever BEIS announce next to make sure that the proposals are fair, balanced and sustainable.

What’s most important is that they make decarbonising energy at home not only the best choice for the environment – saving around 2 tonnes of CO2 each year over their lifetime – but for your pocket, too.