STA BLOGS: We need to get smart about giving excess PV electricity a fair market price

07 March 2019:

In this STA Blog, Sonia Dunlop of SolarPower Europe shines a spotlight on the Government’s legal requirement to remunerate small-scale electricity exports at a fair market rate.

Amidst the Brexit blur, there is a small piece of EU legislation the UK solar industry – and UK consumers – should be paying attention to at the moment. And here’s why.

The EU Renewables Directive, which was officially published on the European statute book on 21 December, states that:

“renewable self-consumers, individually or through aggregators, are entitled 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 and may take into account the long-term value of the electricity fed in to the grid, the environment and society.”

The latest intelligence suggests that the new EU Renewables Directive will apply in large parts to the UK despite Brexit, precisely because its publication in the Official Journal of the European Union has happened before Brexit day on 29 March 2019. Unless Parliament changes the law to say otherwise, the provisions in the European Renewables Directive will apply – apart from perhaps the parts on the target where the UK can no longer contribute. Indeed the UK is already complying with the EU Energy Union governance legislation and has submitted its draft National Energy and Climate Plan to Brussels.

What this means is that as of 30 June 2019 it is actually a legal requirement for the UK to ensure that excess PV electricity from both residential and commercial and industrial installs is remunerated at the market value. And as readers will know, the export tariff, as part of the Feed-in-Tariff scheme, is set to close in the UK at the end of this month.

According to SolarPower Europe, due to the proposed the Smart Export Guarantee having no minimum floor price the UK is now one of the only major markets in Europe that is looking to eliminate guaranteed remuneration for excess PV electricity from self-consumption systems . Even Spain has now reformed its infamous “sun tax” framework on self-consumption in a positive direction. When we tell companies and policy-makers elsewhere in Europe of the situation in the UK they are often incredulous. The UK’s Feed-in Tariff and export tariff situation is unique so far – and it is also exactly what the EU Renewables Directive recast is trying to prevent.

With the looming closure of the export tariff, there has to be some other (simple) mechanism for self-consumption PV installations to get paid a fair rate for their excess power. Without a minimum floor price, there are no certainties that the proposed Smart Export Guarantee will ensure a fair rate, and even so, the gap between its implementation and the end of the export tariff will mean small-scale installations from April 2019 will not be remunerated for their excess electricity until it is in place.

More and more we are seeing the debate shift to a ‘value of solar’[1] approach, where the regulatory framework is designed to recognise the benefits of distributed PV, including avoided grid reinforcements, avoided centralised power generation and of course, the local air quality and climate-related environmental benefits. That is in part what this clause of the Renewables Directive is trying to emphasise.

There are many digital technologies that could be used to set up a smart export price system. Aggregators could step in and aggregate thousands of domestic PV systems, selling the power on wholesale markets. But it has to be cost-effective to bring small units of power to market and there is some way to go in the UK with systems and regulation before this is the case. The situation does not seem to have been helped by leaving the smart meter roll out to suppliers (as opposed to DSOs, although neither system is perfect), and aspiring to only half-hourly metered settlement, while the rest of Europe moves to 15 minutes windows.

In the not too distant future, we can all imagine a situation where homes can sell their power to some smart local or virtual peer-to-peer energy trading platform, powered by blockchain technology with smart contracts being executed, perhaps using cryptocurrency payments.

But the system needs to ensure prosumers are protected and can walk before pushing them to run.

We hope the UK Department for Business, Energy and Industrial Strategy will move to fix this issue as soon as possible – and SolarPower Europe supports the UK Solar Trade Association on its excellent #Fair4Solar campaign. The forecasts for the UK market published in our 2018 Global Market Outlook were not particularly encouraging: a faltering market for 2018 to 2022. We hope to have better news in this year’s edition. If the UK fails to match the (relatively progressive) policies included in the new EU Renewables Directive, it will put its PV industry at an even greater disadvantage, widening the gap between the UK and Europe. Britain has been a leader in terms of domestic PV deployment over the last few years.  By using smart, digital technologies combined with a fair regulatory framework, the UK should build on its large install base and established supply chain and lead the way again on PV in Europe.

[1] ‘The Value of distributed solar PV in Spain’, Greenpeace, October 2018.

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  • Sonia Dunlop is a Senior Policy Adviser at SolarPower Europe, where she is responsible for corporate sourcing, digitalisation and sustainable finance amongst other topics. She was also the lead on the EU-funded PV Financing project which looked at the best solar business models and sources of financing going forward across Europe. She previously worked as the Communications and Public Affairs Manager at the UK’s Solar Trade Association and on EU renewable energy policy in the European Parliament.