What is business microgeneration?

Microgeneration is the term used to describe the small-scale production of energy. The most common form of microgeneration centres around businesses that use renewable energy systems to create their own energy cut the costs of buying from a supplier.

But it’s not only about creating energy for your business. You might even be able to sell back excess energy to the National Grid. Put simply, this means you can both save money and make money, all via one microgeneration system.

Why consider business microgeneration?

Microgeneration offers businesses of all sizes many wide-ranging benefits. Most importantly, it can help you lower your business energy bills. Microgeneration can also help you promote your business as a forward-thinking, socially conscious enterprise - allowing for alternative marketing angles and helping to attract new customers.

Now that most countries have signed up to the Paris Agreement - a global treaty aimed at lowering greenhouse gases - many governments have created incentives for businesses looking to go green. For example, in the UK, microgeneration can allow your business to skip certain taxes, such as the Climate Change Levy, receive subsidies on your energy bills and access a range of funding schemes for installing renewable energy technology. This funding is mostly available under the Non-Domestic Renewable Heat Incentive (RHI).

Microgeneration can also help your business avoid rising energy prices and market volatility. If you qualify for the Smart Export Guarantee, you'll also be able to make money by selling energy back to the National Grid. 

What is the Smart Export Guarantee?

The Smart Export Guarantee (SEG) is a government scheme designed to ensure that households and businesses that generate renewable energy are paid for the electricity they export to the grid. It was introduced in January 2020 to replace the Feed-In Tariff, which closed to new applicants back in March 2019.

To qualify for the SEG, you need to have renewable energy technologies like: 

• Solar panels 
• Wind turbines 
• Hydroelectric systems 
• Anaerobic digestion 
• Micro combined heat and power (micro-CHP) 

For micro-CHP systems, your electricity capacity must be 50 kW or less. For other technologies, the capacity must be 5 MW or less. 

To find out whether your system is eligible and for more information on how to sign up for the scheme, check out our guide to the Smart Export Guarantee.

What is the Renewable Heat Incentive?

The Renewable Heat Incentive (RHI) is a governmental initiative that looks to incentivise homeowners, communities and businesses to invest in renewable heat technology.

The UK government have a target of 12% of all heating being achieved via renewable energy sources by 2020. The RHI was designed to help achieve this target and involves cash payments made over 7 years to those who fit the requirements.

The exact amounts of RHI cash incentives will vary from business to business. They will be based on a variety of factors, such as:

• The technology you use
• The latest available tariffs
• The metering system used to record your generation

Despite the fact it’s a little difficult to provide exact figures for what you will earn via the Renewable Heat Incentive, you can get a general idea by using the RHI payment calculator.

What methods of business microgeneration are available?

There are plenty of methods for microgeneration, however, not all will be suitable. Instead, it’s worth considering which type of renewable energy system will be most beneficial to your business. This is usually centred around your location and the types of power you have access to – for example, solar or wind.

Small Scale Wind Power

It’ll come as no surprise that the UK is one of the leading nations for wind power. That said, wind power is only really suitable for businesses located in exposed areas where the average wind speed is 6mph or more. As turbines are usually large and noisy, they can cause complaints from those in the local area. Despite their size, there are certain turbines ready for installation without planning permission – just be aware, these are subject to very stringent conditions.

Hydro Power

To access a hydro-powered renewable energy system, you need access to a water source powerful enough to turn a turbine to create electricity. What’s more, you’ll most likely need planning permission before installation.

Solar PV

Probably the type of renewable energy system you first think of, solar panels for business are incredibly popular all around the world. Although systems work best in full sun conditions, don’t think you can only use them in areas where sunny weather is common. For example, 50% of all UK solar PV energy is sent back to the national grid. This means you could be making money on 50% of your electricity production, while the rest is used for your own needs. Solar panels will be installed on your roof or installed as arrays, depending on which direction your building faces.

Solar Thermal

Solar Thermal involves capturing solar energy and using it to heat water. It is usually complemented by a conventional boiler. The majority of solar systems create steam which is then turned into mechanical energy, ultimately creating electricity to be used or sold back to your supplier.

Biomass

Biomass, or Anaerobic Digestion, centres around the burning of organic materials such as food scraps, animal manure, fats, oils and more. The end product is biogas which, when combusted, can generate heat and electricity. The downside of biomass microgeneration is the cost involved in installation. However, as with all renewable energy systems, there are different options for funding, such as the Green Investment Bank.

What are the pros and cons of business microgeneration?

As with any tech, there are pros and cons and suitability will depend upon your needs and budget. Here are some of the main advantages and disadvantages.

The advantages of microgeneration

Despite the initial outlay, new microgeneration is widely considered a low-risk investment. With funding schemes, FiT payments and lower future bills, they offer businesses of all sizes the chance to save money by producing their own electricity. But the advantages don’t just stop there.

Since the turn of the century, and especially of late, customers are now increasingly drawn to companies that favour renewable energy for a greener world. By choosing business micro generation, you can tap into these demographics, potentially gaining a wider customer base than you currently have.

Another advantage is the fact business microgeneration helps make the grid more reliable and secure, with energy coming from various locations.

The disadvantages of microgeneration

While the advantages of microgeneration are clear to see, you’ll also want to know about the drawbacks.

The biggest concern is the current state of the national grid. Some researchers do worry that the grid will not be able to manage a massive upscale in distributed energy. If new microgeneration sees a real rise in uptake, distribution network operators would have to create mini-grids with a focus on balancing supply and demand.

That said, Ofgem is actively encouraging DNOs (Distribution Network Operators - the companies responsible for regional electricity distribution) to take a role in energy management. It’s also important to note that the national grid will need to be renovated soon, regardless of whether microgeneration takes off or not.

Finally, as this is a relatively new venture for businesses to take, it’s not without problems. There have been cases where providers have sold microgeneration systems which weren’t viable for the businesses to whom they were sold. There have also been cases of misleading claims, usually centred around the potential savings.

How to set up new microgeneration for your business

When considering business micro generation, your first step is to decide which energy generation system will have the greatest impact. Then, you’ll need to certify your system through the Microgreneartion Certification Scheme (MCS) and also have it installed by a certified installer. Visit the MCS website for more information.

Another useful website is microgeneration.com, which lists some other considerations for businesses looking at new microgeneration. If you’re still asking what is micro generation? Or need some further advice on how you can invest, consider doing the following first:

1. Analyse your business electricity and gas consumption and work out how to lower your energy usage.
2. Research the types of outputs your preferred source of green energy can produce. This will help you understand what savings can be made and whether or not you’ll be able to sell any excess energy back to your supplier via FiT.
3. Consider your location. Do you have spare land? What will your neighbours think about a microgeneration system being installed? Is your building old or new? Are there any small changes you could make to improve your efficiency?

Finally, if microgeneration does sound like something you want to invest in, you should be open to changing some of your energy habits. To get the greatest impact from business microgeneration, you will need to change your habits. This doesn’t involve any huge shifts, but little changes to your practice will enable you to maximise the output of your system, save money, and often make extra money too.

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