The Smart Export Guarantee (SEG) enables small-scale solar generators to earn money by exporting excess solar power to the grid. However, the best SEG rates are significantly lower than the energy price cap. The SEG is a government-backed scheme designed to incentivise small-scale renewable energy generation. The scheme enables homes and businesses with solar panels to earn income by exporting surplus electricity to the local grid.
All licensed energy suppliers with more than 150,000 customers operating in Britain must offer at least one SEG tariff to any eligible generator. Under an SEG tariff, suppliers pay a set price per kilowatt-hour (kWh) of electricity exported to the grid, as measured by a smart meter.
Smart Export Guarantee tariffs
Although the largest energy suppliers must offer a Smart Export Guarantee tariff, they are free to choose the rates they offer to their customers. As of July 2025, the SEG rates available in the market range from a low of 3p/kWh to a high of 16.5p/kWh.
Although there is a wide range in SEG rates, even the most competitive tariff currently available is significantly lower than the energy price cap rate of 25.7p.
While the largest energy suppliers are required to pay for surplus solar electricity, the rates they offer are often a fraction of what those same customers must pay to buy electricity from the grid. This disparity raises questions about whether solar generators are being fairly rewarded for the energy they contribute.
Ben Brading, Managing Director of Business Energy Deals, explains three important reasons for the difference between export and import rates available to solar panel owners.
Network charges
When an energy supplier delivers a kilowatt-hour (kWh) of electricity to a customer, it must pay for the distribution of that power from its point of generation to the customer’s address.
The distribution of electricity in Britain involves both national and regional electricity networks. Energy suppliers incur three distinct and significant costs charged by network operators for the use of their infrastructure.
Firstly, each supplier must pay Transmission Network Use of System (TNUoS) charges when delivering electricity to customers via the grid. TNUoS charges account for approximately 10% of business and domestic electricity bills and cover the cost of operating, maintaining, and developing Britain’s high-voltage National Grid. These charges are rising each year as the grid is upgraded and expanded to accommodate power from new wind farms, particularly in Scotland.
A second charge related to the power infrastructure is the Distribution Use of System (DUoS) charge, which accounts for approximately 15% of electricity bills. Britain is divided into 14 regional electricity grids, which serve as the connection between the National Grid and individual customers within each region. When an energy supplier delivers power to a customer, it must pay DUoS charges to the customer’s local grid operator.
Finally, suppliers must pay Balancing Services Use of System (BSUoS) charges to the grid operator, NESO. NESO is responsible for maintaining the voltage and frequency stability of the grid to prevent infrastructure damage and blackouts. It balances the grid by compensating generators for adjusting their power output to match demand. BSUoS charges paid to NESO account for approximately 3% of electricity bills.
In total, the cost that energy suppliers must pay for using electricity infrastructure in Britain makes up approximately a quarter of all electricity bills.
When a customer of one of these energy suppliers uses the SEG scheme to export power into the grid at a local level, there is no mechanism in place for the supplier to receive a reduction or rebate on these charges.
Environmental levies
There are two important environmental levies that energy suppliers must pay when supplying power from the grid to a domestic or business property. Both of these levies subsidise large-scale renewable energy generation.
The first environmental levy is the Renewables Obligation scheme, which subsidised renewable energy projects built between 2002 and 2017. The scheme issues Renewable Obligation Certificates for each megawatt-hour (MWh) of power produced by participating projects, which licensed energy suppliers must then purchase to offset their supply to customers.
The latest Ofgem publications show that the Renewables Obligation is expected to add 3p/kWh to the cost of electricity in the 2025/26 year.
The second environmental levy is the Contracts for Difference (CfD) scheme, which replaces the Renewables Obligation. It guarantees the price that more recently constructed wind farms receive for their power through a government top-up.
This government top-up is funded through a CfD levy, which suppliers pay at a current rate of 0.6p/kWh.
It is government policy to fund these renewable energy subsidies through the electricity bills of British consumers. Unfortunately, there is no way for small-scale renewable energy owners to earn or benefit from these subsidies when feeding power back into the grid under the Smart Export Guarantee scheme.
Timing mismatch
British energy suppliers must purchase power on the wholesale electricity market to meet the demand of their customers.
The wholesale market is divided into 48 separate half-hour periods of power delivery each day. In this market, the price per kilowatt-hour (kWh) for each delivery period is determined by the forces of supply and demand.
Electricity on the grid is most expensive during the peak evening period between 4 p.m. and 7 p.m., when power demand is at its highest. Receiving power from customers through the SEG scheme provides an alternative to purchasing electricity on the wholesale market.
Unfortunately, maximum solar generation occurs around midday, a lower demand period, when electricity is cheaper. When suppliers design their SEG tariffs, they take into account the fact that the electricity they receive from customers will typically be generated at a time when wholesale prices are lower.
Are Smart Export Guarantee rates fair?
When the government launched the Smart Export Guarantee in 2020, it deliberately chose not to set a minimum export rate. This marked a departure from the older Feed-in Tariff scheme, which had fixed rates.
This hands-off approach may seem unfair at first glance, but it encourages healthy market competition. Several of the larger suppliers actively use the rates they offer on their SEG tariffs to attract new customers.
Without an imposed rate per kilowatt-hour (kWh), the export prices offered by suppliers become a true reflection of the value added by small-scale solar owners who export power to the grid at a local level.
The reason that the best rates available under the Smart Export Guarantee are lower than the cost of purchasing electricity is simply a reflection of the market structure.
Energy suppliers must pay network charges, environmental levies, and peak electricity prices when delivering power to their customers, none of which are recouped when those same customers export power to the grid.
While SEG rates may seem low compared to the unit prices charged on electricity bills, they reflect the underlying economics of the market. However, a broader question of fairness remains: is it right for government policy to continue supporting large-scale generators, while offering no equivalent support to small-scale solar producers?
https://www.businessenergydeals.co.uk/blog/smart-export-guarantee
