People who install solar from April will have to give away surplus until scheme launches

This article is more than 1 year old

This article is more than 1 year old

Households with solar panels are to get a guaranteed payment for excess electricity they export to the grid – but there will be a hiatus when people are expected to give it away for free.

Energy minister Claire Perry said on Tuesday she would legislate for a new market that will make energy firms compete to offer solar homes the best price for any unused energy they export.

The marketplace would replace a scheme that pays households about 5p for each unit of solar electricity they export, which is paid for by all energy billpayers but will close for new applicants on 31 March.

Solar households expected to give away power to energy firms Read more

Energy suppliers with more than 250,000 customers will be mandated to offer a “smart export guarantee” tariff, with solar households expected to shop around for the best rate.

However, the time it takes to implement the guarantee will leave new solar homes giving away unused energy for free for many months.

The government consultation on the plans does not end until March. Once responses have been considered, parliamentary time would need to be secured to pass the legislation ahead of the new market’s launch.

However, the prospect of households giving clean energy away in the long term has been put to rest. The government said it believes “small-scale low-carbon generation should not be provided to the grid for free”.

Perry defended the switch from a subsidy to a market regime, telling MPs: “It is only right that as the price of this power provision has tumbled that we stop using other people’s money to subsidise something that we don’t need to do in order to bring forward solar.”

Suppliers will be free to set the price they offer but there is no floor price beyond companies having to pay more than 0p. That will disappoint the Solar Trade Association which has warned that without a floor consumers risk being paid an unfair fee.

However, the Renewable Energy Association welcomed the proposals which it said could “usher in a new era for small-scale renewables”.

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Labour accused the government of pushing the solar industry off a cliff.

Shadow business secretary Rebecca Long Bailey said: “Rather than a simple flat payment for energy exported to the grid, the government is proposing a hugely complex market mechanism in which large energy companies - notorious for overcharging consumers billions of pounds - can offer whatever sum they deem fit to households.”

Rates could vary depending on the time of day and demand across the energy system. It is not yet clear what level companies will offer, but the current regime is equivalent to payments of nearly £80 a year for a typical solar installation.

Households will be protected from the prospect of having to pay energy suppliers when prices go negative. Such a scenario can happen when energy demand is low in the summer and output from windfarms and solar panels is high, which officials expect will happen for several hours a year from 2020.

Greg Jackson, chief executive of challenger supplier Octopus Energy, said the approach would: “empower citizens to drive and benefit from the transition to a renewable future.”