The Future of Small-Scale Low-Carbon Generation (Smart Export Guarantee 2019): consultation response

Published: 5 March 2019

Introduction

Energy Systems Catapult has responded a consultation by the Department of Business, Energy and Industrial Strategy on The Future of Small-Scale Low-Carbon Generation: Smart Export Guarantee 2019.

Under the Smart Export Guarantee (SEG), government would legislate for suppliers to remunerate small-scale low-carbon generators for the electricity they export to the grid. The evidence gathered from this consultation will allow government to decide on whether, and how, to proceed with the SEG. This consultation is a result of a call for evidence.

This consultation considers future arrangements that would facilitate:

  • a route to market which supports small-scale low carbon generation of electricity
  • market innovation
  • lowering of costs for consumers
  • the promotion of the efficient use of electricity through price signals, for instance promoting export when the grid is experiencing high demand.

Energy Systems Catapult welcomes the introduction of the Smart Export Guarantee (SEG).

Key points

Energy Systems Catapult’s response to the consultation, includes:

  • A SEG can be used as a positive transitional step to a more dynamic market system, with potential positive impacts on innovation for example in data use and analytics; variable renewable generation forecasting; new contractual approaches and business model development.
  • We support the view that the SEG should be a transitional measure until markets can operate effectively without intervention.
  • More broadly we view the shaping of a market regime in which small-scale generators receive competitive and dynamic prices for electricity exports, which accurately reflect their value to the system, as being key for their efficient integration in the medium term.
  • Providing non-binding guidance can be beneficial for market formation.
  • We recommend requiring suppliers to offer tariffs that are objectively linked to market prices in order to allow more accurate price signals to reach end users.
  • We recommend that scheme design avoids being overly prescriptive with respect to tariff structures to enable them to change over time to reflect evolution of the energy system and broader market conditions.
  • We note that due to lack of location-specific information in wholesale market prices, a disconnect might emerge between national prices and local distribution network needs.
  • As highlighted in our recent response to Ofgem’s forward looking programme, we see a need for creating a long-term and more joined up vision of future electricity markets and trading