P442 Explained: How Generators Earn More and Businesses Pay Less

In short: P442 is a new rule (from 2025) that changes how electricity is bought and sold in Britain. It lets small green energy generators, like solar farms, sell power straight to businesses and have it counted properly (through half-hourly matching). This takes some of the extra charges off the bill - around 6p/kWh (30%). So businesses and generators can split the six pence, meaning the business pays less and the generator earns more.

What is P442 / License Exempt Supply

P442 is a change to the rules that decide how electricity is bought, sold and paid for in Britain. (Its full name is a change to the Balancing and Settlement Code, but you don't need to remember that.)

It started on 27 February 2025. For a long time, the old rules were built around a few big energy suppliers. That was fine when most power came from a select few large brown power plants. But as smaller green generators (solar, wind, hydro) started popping up, the system couldn't tell their energy apart from energy sold by the big suppliers.

So small, local green generators often missed out on selling to businesses that wanted cleaner power. One thing worth clearing up: P442 didn't suddenly let small generators sell power. They were already allowed to, as long as they're small (under 5MW). What P442 did was build the system to count that energy properly, so it stops getting lumped in with the charges the big suppliers have to pay.

Why your bill is more than just the cost of power

When you pay an energy bill, you're not only paying for the electricity. You're also paying:

• to use the network of cables and wires that bring power to you,
• the cost of keeping the grid balanced,
• a set of extra charges that fund government energy schemes (these pay for things like support for renewables).

It's that last group, the extra charges that fund government schemes and make up around 6p/kwh of the bill, that P442 helps you avoid on green energy matched straight to you. (The network charges and the Climate Change Levy still apply, and P442 doesn't change those.)

P442 introduced a new settlement role, the Exempt Supply Notification Agent (ESNA). Its job it is to clearly identify which electricity volumes are exempt and ensuring they are settled correctly, rather than being inadvertently captured within licensed supply calculations. The company’s Powertraces platform is designed to automate the complex task of fine-grained energy  matching, providing real-time tracking of supply and demand from multiple sites. This brings a level of structure that was previously missing, making direct supply arrangements between generators and businesses far more practical.

For generators: how you earn more

If you run a small green energy project, P442 gives you a better way to sell your power than just sending it back to the grid for the basic market price. By selling straight to a business and matching your output to when they use power, you get to share in the value of the charges that energy avoids, often worth a few pence for every unit (kWh) on top of the normal price.

When generators earn more, more new green projects get built, which is the whole idea.

Who can take part?

In general, smaller green generators up to 5MW, such as:

1. Small solar, Wind, hydro and anaerobic digestion (food and farm waste) plants
2. Solar panels on commercial rooftops
3. Community energy schemes
4. Sites with their own on-site generation with an import connection

If you're a generator looking for a better price for the power you export, see our guide to the top-paying export suppliers.

How the saving is shared

When green power is matched to your use, the saving it creates, worth up to around 6p per unit (kWh) on the matched energy, is usually shared out so more than one party gains. As a rough example, if the matched energy avoids 6p a unit, a scheme might split it three ways: around 2.5p comes off your bill, around 2.5p goes to the generator on top of the basic export price, and around 1p covers running the scheme, including making sure the matching and usage data sent to the market is correct. The exact split is a commercial choice and varies from one scheme and provider to the next, so it is worth checking how much of the value actually reaches you.

Case study of Licensed Exempt Supply (P442):

Bethesda - Local matching like this is a proven idea. In Bethesda local homes and businesses use smart meters to buy power from a community-owned hydro scheme at a cheaper local rate whenever it is generating. Members save an estimated 10 to 30% on their electricity, the generator earns more than it would by simply selling to the grid as they can earn the wholesale cost + a split of the savings from the exempt taxes and levies , and the money stays in the local community. Bethesda uses an earlier local-supply model rather than P442 itself, but it proves the idea that P442 now opens up much more widely: match generation to use, half hour by half hour, and share the benefit.

A net-positive for the environment

P442 improves how locally generated renewable electricity is recognised within the market. This gives businesses a practical alternative to relying entirely on the centralised grid, where prices are heavily swayed by volatile global energy markets. Instead, businesses can now easily source electricity from local renewable generators. This gives businesses greater control over their energy costs. It also strengthens the commercial viability of local renewable projects by improving returns for generators operating under licence-exempt arrangements. When generators are better rewarded, investment in new renewable projects follows. Over the long term, this supports the development of a more resilient, decentralised energy system. It is one that is less exposed to global market pressures, reduces demand on the national grid, and accelerates progress towards national sustainability goals.

For businesses: how you pay less If you buy energy for your business,

P442 lets you get power straight from local green generators and skip some of the extra charges that would normally be added to your bill. On the energy that's matched to you, those skipped charges can be worth up to around 6p per unit (kWh). That adds up against a typical business rate. You also get cleaner energy from a clear, local source, with more of your money going on the power itself rather than on add-on charges. It's good for the planet too: more power coming from local renewables, less pressure on the national grid, and better returns that help new green projects get off the ground.

A few things to keep in mind

P442 saves you real money, but it's worth being clear about how it works:

• You save on the matched energy, not your whole bill, and how much you save depends on how much of your usage can be matched to green power.
• It lowers the government-scheme charges, not the network charges or the Climate Change Levy, which you still pay.
• It's a new and changing part of the market, so any deal should be set up to handle future changes to the rules.

A good energy partner will work out a realistic saving for your actual usage, instead of just quoting a big headline number. How Purely Energy can help Whether you're a generator who wants to earn more, or a business that wants cheaper, greener power,

Purely Energy can help you understand P442 and find the right deal. For a free quote, or to compare the best business energy rates, fill in the form below. To find out more, call us on 0161 521 3400 or email info@purelyenergy.co.uk.

How can Purely Energy help?

If you want to know more about P422, you can contact Purely Energy. If you would like a free quote about your business contract, or compare the most competitive business energy rates, please fill in the box below. For more information, contact us on 0161 521 3400 or email us at info@purelyenergy.co.uk