What is the Smart Export Guarantee (SEG)?
The SEG requires certain licensed electricity suppliers known as SEG Licensees to offer a tariff and pay eligible generators for electricity which they export back to the National Grid.
SEG Licensees have specific obligations and legislative requirements which they must comply with. The SEG is governed by the Smart Export Guarantee Order 2019 and Conditions 57 & 58 of the Standard Conditions of the Electricity Supply Licence.
SEG licensees can choose the tariff rate, contract length and some other relevant terms which they will offer generators as part of their SEG contract.
While the SEG affords a great deal of flexibility to SEG licensees, any SEG tariff rate offered must always be above zero. There are further criteria which the SEG contract itself must contain – these, and other SEG licensee obligations, are detailed in the guidance for SEG licensees.
All licensed electricity suppliers are required to participate in declaring their SEG status on an annual basis.
How to become a SEG licensee
Licensed electricity suppliers are only obligated to make SEG payments to generators if they are SEG Licensees.
To confirm their status, all licensed electricity suppliers must notify Ofgem by 14 February each year, whether in the next SEG year they will be a:
- Mandatory SEG Licensee - if they have at least 150,000 domestic electricity customers as at 31 December of the immediately preceding year. These suppliers must comply with the SEG arrangements and corresponding obligations. Mandatory SEG licensees must offer SEG payments to eligible generators and cannot opt-out.
- Voluntary SEG Licensee - if they have fewer than 150,000 domestic electricity customers as at 31 December of the immediately preceding year. These suppliers are not required to be SEG licensees as they have not met the minimum threshold of domestic electricity customers, however they themselves can choose to opt-in and participate in the SEG arrangements and corresponding obligations for the entire SEG year.
- Non-SEG Licensee - if neither of the above two options apply, the supplier is a non-SEG licensee. This means they can still choose to make export payments to generators but are not bound by the SEG arrangements.
For more information on your role as a SEG Licensee, including your obligations, please see the Guidance for SEG Licensees.
The status of a supplier, notified to Ofgem, will then apply for the duration of the relevant SEG year (1 April - 31 March). SEG licensees will be bound by the SEG arrangements for the rest of the SEG year, as a result. Each year, electricity suppliers will need to go through the same notification process to confirm their status under the SEG to Ofgem.