Licence Exempt Supply: The energy cost-cutter most businesses have never heard of
Licence Exempt Supply (LES) is a regulated UK arrangement that lets a small renewable generator supply electricity directly to a corporate energy users without a full Ofgem licence, removing several policy levies from the matched volume and typically saving £8–£40 per megawatt-hour.
There’s a part of UK energy law that’s been sitting on the books since 2001, quietly unused, because the system simply wasn’t built to handle it. Now it is, and it could shave a meaningful chunk off your electricity bill.
It’s called Licence Exempt Supply (LES), and if you buy energy for your business and are looking to reduce your corporate energy costs, it’s worth five minutes of your time.
What is Licence Exempt Supply?
P442 is a change to the UK electricity settlement system that allows licence-exempt electricity supply to be Licence Exempt Supply lets a small renewable generator sell electricity straight to your business, without going through a fully licensed supplier in the usual way.
The legal mechanism is Class A of the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001, also known as the Small Generator Exemption. The generator has to make the power itself, stay under 5MW at any one time, and keep within set limits for how much it supplies in any half hour.
That’s been technically possible for over two decades. The problem was settlement, the billing system had no way to cleanly separate “this unit of power came from an exempt generator” from “this unit came from the grid as normal.” So LES existed on paper but rarely worked in practice.
That changed in July 2025, when BSC Modification P442 went live (approved by Ofgem back in May 2024). It introduced a new role, the Exempt Supply Notification Agent, whose job is to match and validate generation and consumption data. In other words, it gave LES the plumbing it needed to actually function commercially. (We’ve written a separate deep-dive on P442 if you want the full detail.)
Why does Licence Exempt Supply matter to business energy buyers?
1. Access to a more direct renewable supply
Every business electricity bill carries a number of policy levies, Contracts for Difference (CFD), the Capacity Market (CM), the Feed-in Tariff (FiT) and the Renewables Obligation (RO). A LES supply agreement mitigates certain levies on all consumption where a match between renewable generation output can be made with your consumption. This typically works out to be a saving between £8-£40 per megawatt-hour.
It is worth remembering that UK commercial electricity prices already sit around 46% above the international average. So this isn’t a rounding error, it’s a material reduction and competitive advantage.
2. The green credentials are actually traceable
Because the generation has to be renewable, all matched power you procure under a LES agreement has a direct, traceable line from generator to meter, not just a certificate bought separately. If you have net zero targets or supply chain sustainability requirements, that distinction matters
3. It opens up more flexible deals
LES is the foundation for several procurement structures: direct power purchase agreements, sleeved arrangements (where a licensed supplier handles the settlement side for you), private-wire connections, and on-site or local generation partnerships. Which one fits depends on your site, your consumption pattern, and how much risk you’re comfortable taking on.
Is Licence Exempt Supply right for your business?
The savings depend on how closely your consumption pattern matches the generator’s output, a business -with steady daytime usage is a much better fit than one operating mostly overnight. It’s also worth checking whether you’re already getting levy relief elsewhere, like through the Energy Intensive Industries (EII) exemption or a Climate Change Agreement (CCA).
That’s really the crux of it: assessing your half-hourly consumption data, finding the right generator match, and structuring the agreement correctly. Get that wrong and the savings don’t materialise. Get it right and it’s a solid, ongoing reduction in cost.
Frequently asked questions
Which levies does Licence Exempt Supply mitigate? LES removes Contracts for Difference, the Capacity Market, the Feed-in Tariff, and the Renewables Obligation from the matched volume of electricity.
How much can a business save with Licence Exempt Supply? Savings typically range from £8 to £40 per megawatt-hour, depending on how closely a business’s consumption matches the generator’s output.
What changed in 2025 to make Licence Exempt Supply work? BSC Modification P442, approved by Ofgem in May 2024 and live from July 2025, introduced the Exempt Supply Notification Agent (ESNA) role, which validates and matches generation and consumption data for settlement purposes.
Is Licence Exempt Supply legal and regulated? Yes. It operates under Class A of the Electricity (Class Exemptions from the Requirement for a Licence) Order 2001 and is recognised by both Ofgem (Office of Gas and Electricity Markets) and DESNZ (Department for Energy Security & Net Zero).
Which businesses are the best fit for Licence Exempt Supply? Businesses with steady daytime consumption that closely matcha renewable generator’s output tend to see the largest savings. Businesses already benefiting from relief such as the Energy Intensive Industries exemption or a Climate Change Agreement should check for overlap first.
Want to know if it stacks up for you?
At Unyfi, we run the numbers against your actual consumption data, find a suitable generator match, and handle the whole process from matching through to ongoing settlement.
If any of this sounds relevant, cutting policy levies, improving traceability on your renewable supply, or just exploring direct-from-generator options, let’s have a quick chat.
Get our full guide to License Exempt Supply or book a free, no-obligation consultation with our energy team.
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