Exempt Supply 101 – Unlocking Value for UK Businesses

What is Exempt Supply and why does it matter now?

Exempt Supply refers to the ability to supply electricity without holding a full supply licence, provided certain conditions are met under the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001.

Today, thanks to regulatory changes and improved settlement processes, it’s becoming a practical tool for cost optimisation and decarbonisation strategies.

Under the exemption regime, specific classes (A, B, C) allow businesses to supply electricity to connected sites or customers without triggering full licensing obligations. This can significantly reduce exposure to policy levies such as Contracts for Difference (CfD) and Capacity Market (CM) charges—provided exempt volumes are correctly reported (see: Electricity Licence Exemptions).

Why now?

The BSC Modification P442 has streamlined the process for distinguishing exempt and licensed volumes in settlement. This means businesses can confidently structure exempt arrangements without risking compliance breaches or levy misallocation.

Industry Examples:

• Food & Beverage Manufacturing: A factory with on-site CHP can supply heat and power to adjacent processing units under Class A exemptions, reducing costs and improving sustainability credentials.
• Healthcare Estates: Hospitals operating embedded generation can share electricity across their campus without incurring full licence obligations, supporting resilience and cost control.
• Public Sector: Local authorities running district energy schemes can optimise budgets by leveraging exemptions for community heat and power projects.
  
  

Key Considerations:

• Eligibility depends on strict criteria—such as physical connection and capacity limits—so legal and technical due diligence is essential.
• Evidence trails matter: maintain documentation to demonstrate compliance with exemption conditions.
• Engage early with your licensed supplier and ESNA to ensure accurate data flows and levy treatment.
  
  

Action for Businesses:

Audit your generation assets and review whether exempt supply could unlock savings or support sustainability goals. For detailed guidance, start with https://www.gov.uk/guidance/electricity-licence-exemptions 

How our platform can support your business

Navigating exemption rules and settlement processes can be complex, especially when managing multiple sites or embedded generation assets.

Our platform simplifies this by streamlining data flows, compliance checks and reporting on exempt vs licensed volumes.

For sectors like manufacturing or retail estates, our tools help optimise on-site generation strategies while ensuring accurate levy treatment. This means you can focus on operational efficiency and sustainability goals without worrying about regulatory pitfalls.