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Ofgem Unlock Solar Battery Storage Market with New Guidance

Ofgem has cleared confusion around the FiT scheme* removing a barrier to solar battery installation for 900,000 UK homes.

The updated technical guidance states that the installation of solar storage alongside a smart meter will not change the amount of export tariff homeowners will earn.

So domestic customers who already have FIT-accredited solar and wish to install a solar battery behind a smart meter will keep their ‘deemed’ (estimated) export payments as long as the usual requirements are met, e.g. the installation generates under 30kW and has a bidirectional generation meter for DC-coupled units etc.

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Why is the New Guidance Important?

The Feed-in Tariff Scheme

Currently, solar owners benefitting from the FiT scheme receive 2 payments:

  • The Generation Tariff which pays the solar owner for every unit of energy generated by their system; this is measured by a generation meter.
  • The Export Tariff which pays the solar owner for any solar generated energy not used in the home which is automatically exported to the National Grid. As most solar installations do not have export meters to track exactly how much energy is being exported, this figure is usually estimated by the energy supplier at half of your generated energy.
  • Solar Batteries

    If you have a solar battery installed in addition to your solar panels, you can store any surplus energy you generate (which would usually go to the Grid) for use at another time when the panels aren’t generating, e.g. at night.

    This means even cheaper energy bills as you need to buy less energy from a supplier and that you have a backup source of energy in the case of a blackout. If you have an electric vehicle a solar battery can also provide free power for your car. In most cases, i.e. homes with no export meter, installing a solar battery also has no impact on the export FiT payments as this is paid based on half of your generated energy, even if you send nothing back to the Grid.

    Smart Meter Roll-out

    The government wants energy suppliers to install smart meters in every home in England, Wales and Scotland with the goal of every home being offered a smart meter by 2020. These meters automatically send meter readings to your energy supplier for more accurate energy bills.

    Solar Battery + Smart Meter

    The complication here is that a smart meter will track exactly how much energy you are exporting. If you install a solar battery to keep your surplus energy rather than send it to the Grid, the meter will show this and you would lose your export tariff payments which are currently paid based on half your energy generated, regardless of how much you actually send back.

    The result is that as more and more homes have a smart meter installed, many solar homeowners believe that installing a battery with a smart meter will mean they no longer receive their export payments. This is largely because there are 2 sources of conflicting guidance:

  • Some guidance suggested that solar homes installing smart meters would then need to switch to export metering. This meter would measure exactly how much energy their solar installation was sending to the Grid and they would be paid based on that figure, rather than the ‘deemed’ or estimated amount they are currently being paid.
  • The other official guidance said that homes would not receive payments for exported energy if they installed a solar battery as this could lead to owners being paid for energy taken from the Grid rather than solar panels.

Solar batteries have the potential to revolutionise how we live, but to date the market had been held back from expansion because of this confusion.

By clarifying that homeowners can install a solar battery and smart meter and keep their ‘deemed’ export payments, Ofgem has removed a big barrier for 900,000 solar homes in the UK who may have been discouraged from solar storage in the past.

*Ofgem’s clarification is also relevant for the Renewables Obligation (RO) scheme which supports large-scale renewable electricity projects in the UK. However, smaller scale (domestic) generation is mainly supported through the Feed-in Tariffs (FiT scheme).

What Exactly Has Ofgem Said?

The official guidance document from Ofgem is quite complex but the key message is found in the executive summary which states:

‘The legislation underpinning the RO and FIT schemes does not refer to or define storage or storage facilities. This means that the co-location of storage with accredited renewable generation is neither expressly prohibited nor expressly provided for under the schemes.

‘However, we consider that where the requirements of the schemes continue to be met, storage can be deployed and the accreditation of RO generating stations or FIT installations can remain valid under the existing legislative framework.’

But What Does it Mean?

Ofgem hasn’t changed the regulations, it’s simply made them clearer.

So, in a nutshell, this clarification is good news for the UK’s 900,000 solar homeowners who want to install a solar storage system / solar battery and smart meter but may have been discouraged by the belief that they would lose some of their FiT earnings. They can now invest in a solar battery alongside a smart meter and be sure they will continue to receive their estimated export payments.

Chair of the STA’s Residential Energy Storage Working Group, Nick Wood, has said:

“Government has been telling the industry that they want to see battery storage market take off in the UK, but the confusion around installing battery storage with existing FIT-accredited solar has been a key barrier. It’s very good news that Ofgem has listened and that it has made the right decision to help unlock the retrofit market. This now means that the domestic battery storage industry in the UK can install batteries and smart meters in existing solar homes with confidence that deemed export payments, which are valued by solar home owners, are safe.”

STA CEO Chris Hewett said: ‘Credit to Ofgem for listening and for doing the right thing here to get domestic smart homes moving forwards. We now need Government to remove the much higher 20% VAT for retrofit battery storage systems, compared to 5% VAT for new PV and storage system, to really boost this market.

‘We would like to see this deemed approach retained as an option for existing solar homes that want to install smart metering alone, until we can be confident they will not be caught up in regulatory spaghetti or potentially hidden expense.’

What Else Do Solar Owners Need to Know?

It’s also worth noting that the document from Ofgem highlights 4 key factors that solar owners need to consider before installing a solar storage system; this is because it’s possible that in some cases installing solar storage and a smart meter ‘may impact the eligibility of an accredited RO generating station or FIT installation to receive continued support under the schemes, or may alter the amount of support received’.

  1. Co-located storage does not change the homeowner’s obligations to comply with the FIT scheme requirements.
  2. Solar owners can only receive FiT payments for eligible renewable electricity generated by an accredited FIT installation.
  3. The introduction of the storage will not alter the Total Installed Capacity of the FiT installation.
  4. The FiT schemes eligibility requirements are not changed by the type of storage Technology installed.

Ofgem’s guidance can be read in full here: ‘Guidance for generators: Co-location of electricity storage facilities with renewable generation supported under the Renewables Obligation or Feed-in Tariff schemes (Version 2)’

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