Post: What could Class A License Exempt Supply mean for your business?

What could Class A License Exempt Supply mean for your business?

Built inside the unit price of power, alongside wholesale power and network costs, sits a stack of policy levies: the Renewables Obligation, the Capacity Market, Contracts for Difference, the Feed-in Tariff. Collectively, these policy costs add around £57/MWh to the cost of every unit of electricity a business consumes, and that number is expected to increase further in the future.

For large energy users, that’s a cost that sits on top of wholesale price volatility, one that compounds year after year regardless of how efficiently a site runs or how well it’s hedged. It depends on how the electricity itself is sourced and contracted. That’s where Class A License Exempt Supply comes in. In this article we spoke to GridBeyond CCO Mark Davis about Class A License Exempt Supply and the benefits for demand customers.

Q: What is Class A License Exempt Supply?

A: Class A exemption is a provision that allows small, independent generators to supply demand customers directly, without routing that supply through the full weight of a licensed supplier’s obligations. For a generator, this means better commercial terms for the power they produce. For the demand customer, volumes matched to that generator, on a half-hourly basis, are exempt from the policy levies that would otherwise apply. This means a business doesn’t need to install a single solar panel or battery on its own site to benefit. It doesn’t need to become a generator or take on the operational complexity of running one. What it needs is a matched supply arrangement with an independent generator, structured correctly and settled correctly, and the exempt volumes simply arrive at a structurally lower cost than standard grid supply. This isn’t a short-term discount or a promotional rate that reverts after year one. It’s a change to how the supply itself is priced, and it holds for as long as the arrangement is in place.

Q: What levies are we actually talking about?

Policy levies currently add around £57 per MWh to every unit of electricity consumed in the UK. The main components are:

• Renewables Obligation (RO): the single largest levy on a typical bill, funding legacy renewable contracts
• Capacity Market (CM): this funds backup generation capacity across the grid
• Contracts for Difference (CfD): funds newer low-carbon projects, and forecast to rise as more capacity comes online with future auctions
• Feed-in Tariff (FiT): smaller, but still meaningful, funding distributed generation export payments

Under a Class A arrangement, volumes matched to your generator partner are exempt from these charges.

Q: Why does the timing matter right now?

Some of the levies in that £57/MWh figure are relatively stable. The Capacity Market and the Feed-in Tariff are relatively predictable costs, funding backup generation and legacy export payments respectively. The Renewables Obligation, the single largest levy on a typical UK bill, funds contracts signed years ago and isn’t going anywhere soon. But as more low-carbon capacity is awarded CfD contracts, that cost is forecast to rise sharply.

For a demand customer locking in a Class A arrangement, the saving on matched volumes is calculated against today’s levy stack, but the value of avoiding future levy inflation compounds as CfD costs climb.

Q: What’s the catch?

There is some genuine complexity, and it’s worth being upfront about it. Class A exemption requires additional contractual layers beyond a standard supply agreement: one arrangement connecting the generator, the supplier and the demand customer, and a separate one directly between the generator and the customer. Someone also has to take responsibility for ensuring exempt volumes are matched correctly on a half-hourly basis and treated properly within industry settlement processes and under this structure, that responsibility sits with the licensed supplier, not the generator and not the customer.

That’s the part that puts most businesses off. It’s also exactly the part a specialist partner exists to remove. From the demand customer’s side, the day-to-day experience should look far simpler than the underlying legal structure: a contract, matched volumes, and a lower bill, with the matching, settlement and compliance handled behind the scenes.

Q: Who is this actually suited to?

It works best for sites with a reasonably predictable, sizeable load profile that can be matched against a local independent generator’s output. Class A exemption offers a durable saving that doesn’t depend on timing wholesale markets correctly, and doesn’t require any capital investment in on-site generation.

For demand customers willing to look at how their electricity is actually sourced and matched, rather than simply which supplier issues the invoice, Class A License Exempt Supply offers a saving that gets better with time.

GB | Benefit from Class A PPAs

Under a Class A License Exempt Supply arrangement, qualifying demand customers can have these costs significantly reduced or removed entirely, by receiving electricity directly matched to a local independent generator.

Learn more