Behind the meter: Unlocking the value of private electricity networks

Private networks and onsite energy solutions offer businesses a powerful route to decarbonise, reduce costs, and take greater control of their energy strategy:

• they allow a closer and more direct relationship between generators and offtakers, enabling organisations to select generation sources that align with their sustainability objectives, including procuring electricity directly from renewable generation assets

• by avoiding the public electricity grid, offtakers do not need to pay a licenced supplier for their entire electricity demand. Licenced suppliers include a number of additional levies, and charges (including use-of-system charges) in the pricing, so by avoiding paying a licenced supplier for electricity, a business is avoiding these charges too, and pays an electricity price that more closely reflects the wholesale market costs

• businesses can also achieve cost-certainty by signing long-term power offtake arrangements with a local or onsite energy provider. A long-term power purchase agreement coupled with an electricity price that is cheaper than the then-prevailing market price can be a great benefit to businesses looking to strike the balance between cost-certainty and avoiding wholesale electricity price volatility; and

• private network arrangements also provide greater control over energy procurement and strategy. By selecting counterparties and generation sources directly, organisations can have greater confidence in the provenance of their electricity, aligning their energy procurement strategy with wider commercial and sustainability objectives. The costs that may be saved in taking this approach can be redeployed into the business, or businesses may use them to invest further in energy procurement, energy efficiency, or energy saving measures such as acquiring interests in the generation or storage assets that are now supplying them electricity

As a result of these benefits, private networks have become increasingly attractive to energy-intensive users, campuses, logistics hubs, and data-driven operations seeking to future-proof their estates and capture both the financial and environmental value of local renewable generation.

Well-structured behind-the-meter solutions also aid the wider public electricity grid, enhancing energy resilience by reducing reliance on constrained grid infrastructure and supporting more flexible, efficient, and reliable site operations.

Navigating the licence exemption regime

Under the Electricity Act 1989, it is a criminal offence to generate, distribute, or supply electricity without a licence or a valid exemption. This rule applies even to small-scale or local networks. Breaches can result in unlimited fines, and company directors may be held personally liable if the offence occurs with their consent or because of their neglect.

While it is possible that a scheme or development could benefit from an exemption to the requirement for a licence, the application of the exemptions is far from straightforward. There are two types of exemptions that could apply to a scheme:

• Class exemptions – these apply to generators, distributors, suppliers, or transmission system operators who fall within specified classes, which are set out with detailed criteria in the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001; and

• Individual exemptions – these are granted by the Secretary of State on application by the scheme operator or the person who is conducting the relevant licensable activity for which they are seeking an exemption. These exemptions are rare and typically limited to generation activities under 100MW

In practice, private electricity network arrangements most commonly seek to rely on class exemptions. However, applying the criteria for a specific class exemption is not always straightforward; the relevant legislation was enacted more than 25 years ago, before the renewables revolution and before businesses fully started grappling with on-site energy procurement solutions, so the legislation does not easily appreciate the current development of decentralised energy solutions, nor the sophistication of schemes that businesses are looking to deploy. This can make the class exemption rules difficult to apply in practice, particularly where arrangements involve multiple users, multiple assets, or more complex “microgrid” structures.

The real challenge is not simply identifying that an exemption may be available, but ensuring that the relevant criteria are properly satisfied. Operators can fall into the trap of assuming they qualify without fully understanding the criteria, and projects may evolve over time in a way that takes them outside the scope of a class exemption that was initially assumed to apply. For these reasons, the Department for Energy Security and Net Zero and Ofgem strongly recommends seeking legal advice where there is any uncertainty about licensing or exemption status.

Conclusion

The increasing deployment of private electricity networks reflects a broader shift in how energy is generated, distributed, and consumed across the UK. In particular, the continued growth of decentralised and low-carbon generation is driving demand for more localised and flexible energy solutions outside the traditional licenced supplier-led model. When structured correctly, private electricity networks and behind-the-meter arrangements can provide significant cost-saving and environmental benefits to businesses.

As these arrangements become more sophisticated, a key challenge for developers and operators will be ensuring that private network structures remain fit for purpose. Changes in scale, asset mix or user profile can affect how a scheme is characterised from a regulatory perspective, including whether it continues to fall within the scope of any applicable class exemption under the Electricity Act 1989.

This underscores the importance of designing private network arrangements with sufficient flexibility to accommodate future expansion or operational change. In this context, early and ongoing legal input is critical not only to mitigate the risk of non-compliance, but also to ensure that projects can scale and adapt without undermining their commercial or operational objectives.