Excess Solar Panel Energy – Can You Sell It Back to the Grid?

The adoption of solar panels across the United Kingdom has seen significant growth in recent years, fuelled by rising energy prices, increased environmental awareness and government incentives to decarbonise domestic energy use. As more households and small businesses invest in solar photovoltaic (PV) systems, a common question begins to arise: what happens to the excess solar panel energy generated by these systems? More specifically, is it possible to sell this surplus electricity back to the grid?

This article explores the ins and outs of dealing with excess solar energy in the UK, with a focus on grid interaction, available compensation schemes, and what homeowners need to know in order to benefit fully from their solar installations.

What Is Excess Solar Panel Energy?

Excess solar panel energy refers to any electricity generated by your solar PV system that is not used at the time of production. For most households, peak solar generation occurs during midday hours — typically when many people are out at work or school, resulting in lower domestic electricity usage. In such cases, the solar panels may generate more electricity than is consumed in real time.

Without battery storage, this surplus energy has nowhere to go except back into the national grid. Depending on your system setup and the agreements you have with your energy provider, this energy may be eligible for financial compensation or simply be exported without any economic benefit.

How Solar Systems Work in the UK Context

In a standard on-grid system in the UK, solar panels generate electricity that powers the home or business. Any unused electricity flows through an inverter and into the national grid. Meanwhile, if the household requires more electricity than the panels produce (such as during the evening), energy is drawn from the grid as usual.

The primary challenge with solar power is its intermittent nature. It generates only when the sun shines, which doesn’t always align with periods of high electricity demand. Hence, unless the energy is consumed immediately or stored in batteries, it is likely to be exported.

Historically, many homeowners simply allowed this energy to return to the grid without compensation, but today, government schemes and supplier initiatives offer fairer options for solar panel owners.

The Smart Export Guarantee (SEG): Selling Excess Energy in the UK

As of 1 January 2020, the UK government introduced the Smart Export Guarantee (SEG) to replace the former Feed-in Tariff (FiT) scheme. Under SEG, licensed electricity suppliers with more than 150,000 domestic customers are required to offer tariffs to pay small-scale generators for excess electricity exported to the grid.

To qualify, you must meet certain conditions:

• Use a renewable source (solar PV, wind, hydro, micro-combined heat and power).

• Install equipment certified by the Microgeneration Certification Scheme (MCS).

• Have a smart meter or other export-capable meter installed.

Under SEG, excess solar panel energy is measured and valued by the supplier according to their own export tariff rates. Some tariffs pay a fixed rate per kilowatt-hour (kWh), while others offer variable rates depending on demand or wholesale market conditions.

Fixed vs. Variable SEG Tariffs

When it comes to SEG payments, homeowners typically have the choice between fixed and variable tariffs:

• Fixed-rate SEG tariffs provide a consistent price per kWh exported. These are predictable and straightforward, which appeals to many solar users.

• Variable-rate SEG tariffs fluctuate based on electricity market prices, time of day, or grid demand. While potentially more lucrative, they also come with higher risk and complexity.

It’s worth shopping around and comparing rates from different energy suppliers, as SEG is a competitive market and prices can vary significantly — from as low as 1.5p per kWh to over 15p in some cases.

How to Apply for SEG Payments

To start receiving payments for your excess energy, you’ll need to:

1. Install a qualifying solar PV system with MCS certification.

2. Set up a smart meter capable of measuring exports.

3. Choose an SEG supplier and apply to join their scheme.

4. Submit the necessary documentation, including proof of ownership and meter readings.

Once accepted, you will begin receiving payments directly from your supplier based on the quantity of electricity you export each month or quarter, depending on the tariff terms.

Can You Still Benefit If You Installed Solar Before 2020?

If your system was installed under the previous Feed-in Tariff (FiT) scheme, you may already be receiving payments for both generation and export. These contracts usually last for 20 years, with fixed rates set at the time of installation.

In such cases, you are not eligible to join an SEG tariff as long as your FiT agreement remains in place. However, FiT payments are typically more favourable than current SEG rates, so most homeowners prefer to remain under the original scheme until it expires.

Is It Worth Investing in Solar Just to Sell Energy?

While the idea of selling excess solar panel energy may sound appealing, it’s important to note that financial gain from exports is only one part of the picture. Solar panels provide the greatest value when their electricity is used directly in the home, reducing the need to buy energy from the grid at retail prices — which are significantly higher than export rates.

Exporting your excess energy provides some additional savings, but it is unlikely to make your system profitable on its own. For example, if your SEG tariff pays 5p per kWh and your retail energy cost is 30p per kWh, you gain far more by using the energy yourself than by selling it.

Therefore, it’s wise to focus on self-consumption first — and then look at exports as a bonus.

Boosting Self-Consumption: Alternatives to Exporting

To make the most of your solar energy, consider shifting more of your energy use to daylight hours. Here are a few ways to increase self-consumption:

• Use timers on washing machines, dishwashers and water heaters to run during peak sunlight hours.

• Install battery storage systems to store unused electricity for later use.

• Charge electric vehicles during the day using solar power.

• Adopt smart home energy management systems to automate and optimise usage.

These approaches reduce reliance on the grid, improve return on investment, and may eventually make selling your excess energy unnecessary.

What About Energy Storage? Are Batteries Better Than Selling?

Adding a home battery system — such as the Tesla Powerwall, Sonnen or GivEnergy — enables you to store excess solar panel energy for use at night or during grid outages. While batteries involve an upfront cost, they improve energy independence and reduce exposure to volatile electricity prices.

When comparing battery storage to SEG payments, the benefits depend on several factors:

• The difference between retail and SEG rates: If you’re paying 30p/kWh for grid electricity and earning only 5p/kWh for exports, storing your energy is clearly more valuable.

• The size of your solar system: Larger systems generate more excess energy, making storage more attractive.

• Your energy usage patterns: Households with high evening energy use may benefit more from battery storage.

That said, batteries have limited lifespans and may not be suitable for every home. An accurate financial assessment will help determine which option suits you best.

Will You Be Taxed for Selling Energy?

In most cases, small-scale domestic generators in the UK do not need to pay tax on income from SEG payments, as long as:

• The system is for personal use (not part of a commercial business).

• The installation capacity is below 10kW.

• Income remains below a certain threshold.

However, if you begin generating electricity on a larger scale, or as part of a business venture, you may be subject to income tax or VAT. It’s always a good idea to consult a qualified tax advisor if you’re unsure.

Can You Sell Electricity to Your Neighbours?

At present, UK regulations do not allow direct peer-to-peer (P2P) energy sales without involving a licensed supplier. This means that even if you generate excess solar panel energy, you cannot sell it directly to your neighbour unless you operate through an authorised intermediary.

However, several pilot schemes and blockchain-based technologies are exploring the potential of P2P energy trading. If regulations evolve to accommodate such models, this could open up new opportunities for local energy exchange in the near future.

Frequently Asked Questions (FAQ)

1. How much can I earn from selling excess solar panel energy?
It depends on your SEG tariff. Some suppliers pay as little as 1.5p per kWh, while others offer over 15p. Actual earnings vary by usage and system size.

2. Do I need a battery to benefit from my solar panels?
No. While batteries help maximise self-use, you can still receive SEG payments for excess energy without storage.

3. Can I export electricity without a smart meter?
You’ll need a smart or export-capable meter to qualify for SEG payments, as suppliers must measure exactly how much you export.

4. Is SEG the same across all energy suppliers?
No. SEG tariffs vary widely. It’s worth comparing offers from different licensed suppliers to find the most favourable terms.

5. Will I still need to pay for electricity from the grid?
Yes. Unless you generate and store 100% of your energy needs, you’ll still rely on grid electricity during low-sunlight periods.