Energy for manufacturers

How manufacturing sites buy energy differently

Many manufacturers fall into Ofgem's large business band: 50 or more employees with turnover above 6.5 million pounds or a balance sheet above 5 million pounds, or use of more than 200,000 kWh of electricity or 500,000 kWh of gas a year. Ofgem notes that some suppliers decide which contracts and protections apply by business size and some by annual consumption. Either way, the extra protections Ofgem gives microbusinesses, such as limits on evergreen termination notice, will not usually apply, so the terms you agree carry more weight.

What makes manufacturing different in practice:

• Load shape: shift patterns, continuous processes and start-up peaks matter as much as the annual total.
• Metering: larger electricity supplies are half-hourly metered, so the bill reflects when you use energy, not only how much.
• Bill structure: capacity charges, time-of-day network charges and policy costs are more visible, and on some contracts are passed through at cost.
• Gas: process heat, ovens, dryers and boilers can make gas as significant as electricity.
• Tax and relief: Climate Change Levy applies to industrial use, many sectors can reduce it through a Climate Change Agreement, and government schemes exempt eligible manufacturers from some electricity policy costs.

The rest of this page takes each of these in turn.

Half-hourly metering and capacity charges

A half-hourly meter records electricity use every 30 minutes and is read remotely. For a manufacturer, that data is valuable: it shows the baseload running overnight and at weekends, the peaks when lines start up, and how demand compares with the capacity you pay for.

That last point matters because half-hourly sites pay a daily capacity charge on the agreed capacity, in kVA, set in the connection agreement with the distribution network operator, whether or not they use it. If demand goes above the agreed figure, excess capacity charges apply. Reviewing your maximum demand against your agreed capacity, especially after a change in production, is a sensible check. Any change to the agreed capacity is made with the network operator.

Some half-hourly bills also show reactive power charges, which relate to the power factor of equipment such as large motors. If expansion will push you beyond your current supply, see new business electricity connections for how upgrades work.

Contract structures for large loads

Large users have more contract options than small businesses. Ofgem describes flexible contracts, sometimes called structured contracts, as suitable for large businesses that use a lot of energy. The three structures you are most likely to consider:

None of these is right for every site. A fixed price gives budget certainty for the term. A flexible contract lets you buy in portions over time, so market movements can raise costs as well as lower them; Fidelity Energy's own terms describe flexible procurement as inherently more risky than fixed procurement. A pass-through contract shows non-commodity costs separately but means they can change during the term. Fidelity Energy offers flexible procurement, which covers the energy (commodity) part of the price only, and can explain how it compares with a fixed contract for your sites. Our guide to business energy tariffs covers every tariff type side by side.

Non-commodity costs

For large electricity users, the non-energy part of the price is substantial. Non-commodity costs include distribution and transmission network charges, balancing costs, metering and settlement, and the costs of government schemes such as the Renewables Obligation, Feed-in Tariffs, Contracts for Difference and the Capacity Market. On a fully fixed contract the supplier prices these in; on a pass-through contract they are shown and charged at cost.

Because some of those policy costs are the target of government relief for industry, it pays to know which of them appear on your bills and how your contract treats them.

Government schemes that cut electricity policy costs for manufacturers

Two government schemes exempt eligible industrial sites in Great Britain from some of the policy costs above. Eligibility is decided by the government, not by suppliers or brokers, and the supplier applies an approved exemption to the bill.

The first BICS application window runs from 1 October to 30 November 2026. Applications ask for details of each manufacturing site, including its MPANs, and electricity bills covering six consecutive months from the last twelve. A business that already receives Supercharger support can also apply for BICS, but cannot get relief for the same activity under both. Where a manufacturer pays for electricity through a landlord or site operator, the exemption is applied to that party's bill and passed on; see business energy for landlords.

Check the current guidance on gov.uk before you apply, and tell whoever prices your energy if a site is approved, because the exemption changes how those costs should appear on your bills.

Climate Change Levy and Climate Change Agreements

The Climate Change Levy is a tax on electricity, gas and solid fuels used by industrial, commercial, agricultural and public-service businesses. Your supplier charges it per kWh and shows it on the bill. Rates are set by the government from 1 April each year, and since 1 April 2024 the main rates for gas and electricity have been the same per kWh.

Climate Change Agreements (CCAs) are voluntary agreements between industry and the Environment Agency, which runs the scheme for the whole of the UK, to reduce energy use and carbon emissions. In return, sites in a CCA receive a discount on CCL. They are available to a wide range of sectors, from energy-intensive processes such as chemicals and paper to supermarkets and agricultural businesses such as intensive pig and poultry farming. The structure is:

• Umbrella agreements, between the Environment Agency and a sector association, which set the sector's framework and targets and list eligible processes.
• Underlying agreements, between the Environment Agency and an operator for a site or group of sites, with targets derived from the umbrella agreement.
• Reporting of energy use and emissions against those targets, which keeps the site eligible for the discount.

To join, an operator applies first to its sector association. A reduced rate certificate lists the facilities entitled to the discount. The current phase of the scheme has target periods running from 1 January 2026 to 31 December 2030; rules and reporting dates change, so check the current position on gov.uk and with your sector association.

Some uses are exempt from CCL altogether, including energy not used as fuel and supplies to or from certain schemes certified under the Combined Heat and Power Quality Assurance (CHPQA) programme. The CCL guide explains the exemptions and how to claim them.

Green electricity and green gas for industrial sites

Many manufacturers are asked by customers and investors about the energy behind their products. The main routes are:

• Green electricity tariffs, backed by Renewable Energy Guarantees of Origin, one per MWh of renewable output, used by suppliers for fuel mix disclosure. See green electricity for business.
• Power purchase agreements, where a business contracts for output from renewable generation. In a virtual PPA the electricity is not delivered to your site: it is sold into the wholesale market and the difference is settled financially with the generator. Fidelity Energy advises on and manages virtual PPAs.
• Green gas, backed by Renewable Gas Guarantees of Origin for biomethane injected into the grid, or tariffs backed by carbon offsets. See green gas for business.

A green tariff does not remove Climate Change Levy: the exemption for renewable electricity only covers electricity generated before 1 August 2015. Ask for the evidence behind any green claim before you rely on it in your own reporting.

Energy data, bill checking and reporting

The more energy a site uses, the more it pays to know exactly where it goes and to check that every bill is right. Fidelity Energy offers several services that sit alongside the supply contract:

• Half-hourly reporting through its Etainabl platform, showing use every half hour across sites, including out-of-hours baseload.
• Bill validation, checking bills against contract rates, standing and capacity charges, VAT and CCL, meter readings and pass-through charges.
• Energy audits, looking at consumption, baseload and peak demand to find practical improvements.
• Carbon reporting support for Streamlined Energy and Carbon Reporting (SECR) and the Energy Savings Opportunity Scheme (ESOS).
• Meter operator contracts for half-hourly sites.

We cannot say in advance what any of this is worth, because that depends on your sites. What good data does is make conversations about contracts, capacity and investment much better informed.

How we can help

We help manufacturers bring the energy picture together: bills, MPANs and MPRNs, half-hourly data, capacity, CCA status and contract end dates for every site. We explain the options in plain English and introduce you to Fidelity Energy, an independent energy consultancy and broker that gets quotes from its network of business energy suppliers, offers flexible procurement as well as fixed contracts, arranges the contract and looks after the account, with reporting and bill validation alongside. If you are applying for BICS, we can help you pull together the MPANs and bills each site needs. Our arrangement with Fidelity Energy is explained on how we work with Fidelity Energy.

Want to review energy for a factory or industrial site? Contact us with recent bills for each site and, if you have it, a year of half-hourly data. To compare offers or switch supplier, see compare business energy on our sister site.