The end of the UK Feed-in-Tariff: what does the future hold for solar?
In July 2018, the UK Department of Business, Energy and Industrial Strategy (BEIS) announced the end of the Feed in Tariff (FiT), a scheme put in place in 2010 to incentivise the adoption of renewable energy sources in the UK. The scheme allowed consumers who were generating energy through renewable energy sources like solar panels to sell their excess energy back to the grid for an economic return, which for a few years remained significantly higher than the average cost of energy to the consumer.
The government’s announcement, which will see the end of the FiT come into effect on the 1st of April 2019, did not come as a surprise to a lot of people in the industry: plans for this had potentially already been set out in 2015.

Need for subsidy?
Some industry members have argued that subsidising renewable generation is no longer necessary. Critics have argued that the FiT would have added £1,600m to bills per year in 2020 [1], and the cost of subsidising FiTs has been passed on to all customers, with a regressive effect on low-income households. They argue that while subsidising the cost of renewables may have been justified when the cost of renewable technology was high, the price of renewables has fallen significantly in recent years — in many cases reaching grid price parity — and therefore government subsidies are no longer necessary.
While we agree with the importance of reducing market distortion, we believe the market is not yet a level playing field.
Missing link in regulation
Currently, the market infrastructure does not enable excess green energy generated by households to be sold within an energy marketplace i.e from one consumer or ‘prosumer’, in this case, to another. And without a FiT or export tariff, there would be no payment for households generating more electricity than they consume. Households’ solar generators would effectively be giving free energy away to energy companies, which significantly reduces the return on investment for new solar panel installations, undermining the economic value of renewable assets.
It is crucial therefore that market-based options are made available in order to continue to encourage the installation of distributed renewables and ensure consumers receive a fair reward for the electricity and services they provide to the grid infrastructure.
Without the ability to sell excess electricity to a marketplace, the return on investment for renewable assets is likely to be adversely impacted, reducing the uptake of renewable energy.
Peer-to-peer energy trading: an alternative solution

We believe that peer-to-peer (P2P) energy trading among domestic consumers is critical for this to occur, essentially enabling consumers to sell any excess energy they generate directly to their neighbours. And the P2P trading platform that we’ve created is designed to provide an even higher ROI to local renewable energy owners, using advanced machine learning algorithm predictions to trigger automatic trades between households at the best economic value for both parties. This is all facilitated by our accompanying VLUX token.
Currently, the regulations around energy trading do not explicitly state that P2P trading is not allowed, however they do not accommodate for P2P in the current regulatory framework. Verv has recently joined the Solar Trade Association, a not-for-profit organisation working to increase the uptake of solar energy within the UK. The partnership presents an exciting opportunity for Verv to provide a significant value proposition for households considering solar installation, by offering them a P2P trading option.
Verv’s live community energy trading trial: what does being on the Ofgem regulatory mean?
For Verv community members, you’ll know that our live P2P trading trial that’s being implemented in Hackney London was shortlisted for Ofgem’s regulatory sandbox. We’re delighted to announce that our application was finalised earlier this month, and we’ve been officially granted a place on Ofgem’s sandbox.
Ofgem’s sandbox is designed to provide a space where energy companies can trial new innovations without being subject to the usual regulatory requirements. Companies participating in the sandbox receive derogations from any regulations that would typically prohibit testing of their technology, and instead provide them with the flexibility to trial their solutions in an accelerated environment. Within the Ofgem regulatory sandbox, we are pleased to have partnered with one of the UK’s largest energy retailers to trial the impact of P2P energy on reducing customer bills — more detail coming on this soon!
But our progress in P2P extends beyond just the physical implementation of our technology in trials and sandboxes. We are working to enable all households to engage in P2P trading, and have begun to work with the regulators and government to expedite these changes.
And regulatory progress to develop a P2P energy trading marketplace is more developed than many might realise.
The Balancing and Settlement Code: what is it and how does it relate to P2P?

In April Elexon, who are responsible for the Balancing and Settlement Code and work with Ofgem on regulatory matters around energy use settlement and payment, released a thought leadership paper detailing how customers could “buy power from multiple providers”. Their paper outlined plans to enable households to buy and sell electricity within community energy schemes and EV charging systems.
The Balancing and Settlement Code (BSC) contains the governance arrangements for electricity balancing and settlement in Great Britain. The energy balancing aspect allows parties to make submissions to the National Grid to either buy or sell electricity into/out of the market at close to real-time in order to keep the system from moving too far out of phase. The settlement aspect relates to monitoring and metering the actual positions of generators and suppliers (and interconnectors) against their contracted positions and settling imbalances when actual delivery or offtake does not match contractual positions.
Their paper sets forth a system in which a modification to the current Balancing and Settlement Code would enable P2P energy trading, with each P2P group functioning as a community scheme. It would further enable energy trading within a P2P community of different suppliers, demonstrating the value of a platform provider that coordinates P2P energy trading across multiple energy suppliers, rather than atomised trading contained within each energy supplier’s customer network.
This demonstrates that key players in the market are looking at a move towards P2P as well for the greater good of the energy industry.
Next steps in P2P trading

However, the government and regulators can and should do much more than opening up the market and clarifying the regulations for P2P energy trading.
One of the significant benefits of P2P trading is the additional advantage of local generation and consumption of electricity.
Currently, consumers (roughly speaking) pay the same transmission and distribution costs, whether their electricity is travelling from Aberdeen to Cornwall, or just down the road in their local village.
We should be moving towards a market with greater cost reflexivity, where the benefits of local generation and consumption are adequately reflected in the cost of energy.
At Verv, we believe transmission and distribution charges should reflect the actual use of network — both in terms of transmission network used and by peak/off-peak time of use.
The government’s consultation clearly reflects this intention for a more “cost reflective” energy infrastructure — but the policies and pricing structures set by the government and regulators must put principles into practice.
This will set into motion the right market incentives to create a more efficient grid infrastructure: one that correctly rewards households for installing their renewable assets and helping to secure and stabilise the grid. Rather than building and reinforcing expensive, long-distance transmission and distribution lines across the country, we could be investing in local, distributed renewable resources to ensure a smooth transition to a less carbon intensive economy.
