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How to sell energy back to the grid

Looking to make extra money? Consider upgrading to renewable energy systems and selling the excess energy.

This could lead to your energy provider paying you for the energy produced. It’s a common practice, with over 34K new energy export installations reported by Ofgem in 2021-2022. Learn more about the process below and explore this income opportunity.

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Introduction to Selling Power

Qualifying businesses have the opportunity to sell any surplus renewable energy they produce to the National Grid through their energy suppliers, creating a steady additional income stream.

This is facilitated by The Smart Export Guarantee (SEG) scheme, which businesses can join by exporting electricity and meeting specific criteria. The eligibility criteria vary for renewable energy systems connected to generators and anaerobic digestion. The SEG approves certain renewable energy systems, such as solar, wind, hydro, Anaerobic Digestion (AD), and Micro-Combined Heat (micro-CHP), provided they meet the set criteria.

Selling excess energy to the grid offers several advantages for businesses, including reduced energy costs, potential tax relief, and an enhanced brand reputation. However, there are some drawbacks, including the initial high installation costs, low export rates, and additional paperwork requirements.

What is the process of selling energy back to the grid?

This involves selling the surplus energy you produce back to the National Grid through your energy suppliers, allowing you to earn additional funds for your business.

Individuals generating their renewable energy now have the opportunity to sell it back to their energy supplier. The selling process, once intricate, has become simpler with the widespread adoption of renewable energy systems like solar panels, microturbines, and other eco-friendly installations. Presently, the method for selling excess energy is facilitated by a government-run initiative known as the Smart Export Guarantee.

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The Smart Export Guarantee (SEG) is a program that allows you to register and sell any surplus renewable energy you produce. The UK Government launched the SEG on January 1, 2020, as a replacement for the obsolete Feed-in Tariff (FIT) that stopped taking new applications on April 1, 2019. The shift is influenced in part by the outdated nature of FIT, given that modern solar panels and other renewable technologies are now more affordable to install than in the past.

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How does the process of selling energy back to the grid work?

Businesses in the UK with renewable energy systems connected to small-scale generators are eligible for the SEG scheme, provided they meet specific criteria.

Furthermore, companies that use anaerobic digestion for energy production can also qualify for the SEG program. These are businesses that produce green electricity, by decomposing organic matter such as animal manure, wastewater, and food waste with bacteria.

Review the comprehensive guidelines for anaerobic digestion here. If you want more in-depth information on the functioning of the broader energy market, explore our guide on how energy is bought and sold and its impact on UK prices. For those using small generators, to take advantage of this scheme, you must undergo the application process and meet the requirements outlined below.

Are you eligible?

Businesses situated in England, Scotland, or Wales are eligible to apply for the SEG tariff. Presently, this opportunity is not accessible to businesses in Northern Ireland. You may apply for the SEG if your business produces renewable energy through any of the following methods:

Solar Photovoltaics (PV)

Systems harnessing solar energy, such as solar panels.

Wind Power

For instance, wind turbines or small-scale wind generators that produce electricity.

Hydropower

Produced from the flow of water, either from natural water bodies or man-made rivers or streams.

Anaerobic Digestion (AD)

Energy is produced by employing bacteria to decompose organic matter and convert it into usable energy.

Micro-Combined Heat and Power (micro-CHP)

Refers to any system that simultaneously produces heat and electricity from the same source, such as internal combustion engines.

It is essential to demonstrate that your systems or generators are professionally installed and certified, possibly requiring an MSC certificate (Microgeneration Certification Scheme). The scheme also acknowledges various other certificate types; it is advisable to consult your supplier during the application process for clarification. Depending on your system’s capacity, specific certificates are necessary for eligibility.

In certain instances, you may have the option to integrate your existing business energy meter with the SEG for exported electricity. To determine if this is feasible for your situation, it is recommended to communicate with your supplier. Detailed guidelines for generators can be found here.

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Secure a SEG tariff

To benefit from the Smart Export Guarantee (SEG), sign up separately from your business energy tariff. Suppliers with over 150,000 customers must provide an SEG tariff.

While your current supplier likely offers it, you can choose a different one. Shop around for the best rates, lengths, and conditions. Here’s a list of suppliers offering SEG from April 1, 2023, to March 31, 2024:

If you’re still getting export payments through the Feed-in Tariff scheme, you cannot qualify for a Smart Export Guarantee (SEG) tariff.

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Sell your excess energy

Upon registering for a Smart Export Guarantee (SEG) tariff, you’ll receive payment for each unit of electricity you contribute to the National Grid.

Similar to a standard business energy tariff, SEG tariffs can be either fixed or variable, and these terms vary among suppliers. With a fixed tariff, you receive a set rate for exported electricity over the contract duration, while a variable rate adjusts based on market demand, ensuring that prices will not drop below zero according to government guidelines.

Your earnings are influenced by factors like the quantity and efficiency of solar panels, microturbines, or hydro systems you have in place. Location and your supplier’s rate also play roles in determining your overall earnings.

Receive cash payments

After your supplier obtains readings from your export meter, you will start receiving payments. The frequency of these payments is determined by your supplier, and it can vary.

Typically, Smart Export Guarantee (SEG) payments are transferred through bank transactions on a monthly or quarterly basis. However, specific terms for receiving export payments may vary between suppliers, so it’s advisable to review your contract for precise details.

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Is it possible to sell my unused energy back to the grid if it’s not derived from renewable sources?

Unfortunately, the SEG program is specifically designed for the sale of renewable electricity produced from the aforementioned renewable energy sources, such as solar, wind, hydro, anaerobic digestion, and micro-CHP.

However, you can sell back any renewable energy stored in batteries, or electric vehicles as long as it’s generated from renewable sources. Your energy provider should be able to guide you on how to take advantage of this.

Does the grid have specific size limitations for energy buyback?

Indeed, the Smart Export Guarantee is only applicable to installations with a total installed capacity (TIC) of up to 5MW (megawatts) for most systems. For businesses using micro-CHP systems, a maximum TIC of 50KW is allowed. Systems exceeding these capacity limits are not eligible for participation in the SEG scheme.

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What is the concept of Feed-in Tariffs and how does it impact the sale of energy?

The Feed-in Tariff is a government initiative predating the SEG scheme, designed to promote small-scale renewable energy generation. It aimed to generate electricity and incentivize businesses and homeowners to adopt low-carbon, ‘green’ infrastructure such as solar panels.

The concept behind this program was that customers, both domestic and non-domestic, participating in this tariff would not only benefit from savings on their energy expenses but would also receive payments for selling any surplus energy back to the electricity suppliers themselves.

As of March 31, 2019, the Feed-in Tariff (FIT) is no longer open and is not taking in new applications.

By setting up systems such as solar panels at your business location and producing a portion of your electricity, you lessen your dependence on power from the grid. This, in turn, is likely to result in savings on your business energy bills because you’re purchasing less energy.

The actual savings can vary based on the energy needs of different businesses. For instance, if you own a cafe and decide to install solar panels on the roof, the initial installation cost might be around £6,000. However, you’ll start saving on your energy expenses. In about six to ten years, post the recovery of installation expenses, your dependency on grid energy will reduce, and your total expenses are expected to be lesser than if you hadn’t installed the system.

What advantages does selling energy back to the grid offer?

Participating in the SEG scheme not only brings cash into your pocket but also positions your business for long-term savings.

Reduced energy costs

By implementing systems like solar panels on your business premises and generating a portion of your power, you diminish your dependence on grid energy. This shift is likely to translate into savings on your business energy bills since you are purchasing less energy.

The actual savings can vary depending on the energy requirements of different businesses. For example, if you own a cafe and opt to install solar panels on the roof, the initial installation cost may be approximately £6,000. Despite this upfront expense, you will begin to see reductions in your energy expenses. Over six to ten years, once you’ve recouped the installation costs, your reliance on grid energy will decrease, and your overall costs are expected to be lower than they would be without the installation.

Promotion of renewable energy

An increasing number of consumers are seeking to endorse environmentally conscious businesses. If you’re among them, you can highlight this commitment through online marketing materials and on-site promotions.

For instance, if you own an eco-friendly restaurant equipped with solar panels and practice sustainable waste management, it’s a noteworthy aspect you can promote. This not only reflects your commitment to sustainability but may also attract new customers to your business.

However, it’s crucial to ensure consistency in your sustainability message throughout your business to avoid potential criticism. Explore more on this topic in our guide to greenwashing.

Government incentives

This typically takes the form of relief on green taxes imposed on every business.

For instance, if your business adopts eco-friendly practices, you may qualify for relief from The Climate Change Levy. This environmental tax incentivizes businesses to adopt more sustainable practices and is levied on energy usage, covering lights, heating, and any other power sources for business operations. By installing energy-efficient alternatives, your business may be eligible for exemption.

To explore the complete list of government grants and reliefs for green business practices, you can refer to the official government resource.

Sustainable development

As a nation, our goal is to achieve net zero emissions, and the construction of more carbon-negative technologies plays a crucial and significant role in this endeavour. Implementing green practices in your small business positions you ahead of the competition.

Looking forward, we might witness emerging energy innovations such as wave technology or even solar power from space. These advancements are part of the collective effort to attain our net zero target by 2050.

Explore further insights on net zero and strategies to achieve it in our comprehensive guide.

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What are the constraints of reselling power to the electrical grid?

Having discussed the advantages of selling your surplus stored energy, it’s essential to acknowledge that, like any new initiative, there are potential drawbacks.

Initial investment costs

Implementing green infrastructure involves a significant cost. Upgrading to solar technology, for example, may require an investment of £6,000 to £10,000 for a small system, and it could take up to a decade to recoup the costs.

While you may well save money on your business energy bills and earn money by selling excess electricity made back to your supplier, it’s unlikely to yield an immediate return on your investment. However, making short-term investments in green practices is expected to pay off in the long run, resulting in cost savings over time.

Lower payouts than the Feed-in Tariff

While tariff rates differ among suppliers, individuals acquainted with or have previously enrolled in the Feed-in Tariff may observe lower payments under the SEG scheme—typically ranging between 6p-9p per kWh. This shift is due to the increasing interest in green infrastructure and the introduction of diverse rates for energy exports by the SEG program.

Difficulty in upgrading your meter

As previously mentioned, to be eligible for the SEG tariff, you must possess an export meter. Consequently, you may need to install a new one or upgrade your existing meter to fit the export one, a process that involves paperwork and liaising with network operators. The approval of your tariff application may also take some time, as regulatory authorities will need to verify your certificates.

DIY installations are not approved

Regardless of the type of renewable energy systems you install, they must possess a certification such as the Microgeneration Certification Scheme. This implies that even if you have the capability, you cannot independently install or upgrade the systems. If you’ve installed any part of the system yourself, you will be ineligible for the SEG scheme.

You can conveniently locate a registered contractor for the installation of your systems here.

How Business Energy Comparison can help

Introducing an additional meter may appear to be an added task for your business, so it’s understandable if you require some time to consider this option. If you need further assistance in comprehending how SEG tariffs operate or understanding business energy in general, reach out to the Business Energy Comparison team today. We are also available to assist with your business energy requirements, encompassing business electricity and business gas.

If you prefer to delve into business energy information on your own, explore our energy guides section to access content from our team of energy experts.