Factory and manufacturing energy

A factory, warehouse or food producer buys energy in a different league from a shop: bigger volumes, half-hourly meters, capacity charges and a real chance of tax relief on the levy side. Most of the extra cash opportunities come from understanding the charges, not the headline rate. This page sets out how manufacturing energy differs and where schemes such as Climate Change Agreements and the proposed BICS fit in.

What makes industrial energy different

Three features separate manufacturing from small-business energy:

• Scale. Use is measured in hundreds of thousands or millions of kWh, so a small change in pence per unit turns into thousands of pounds.
• Metering. Larger electricity supplies are on half-hourly meters that record every 30 minutes. They bring time-of-use charges and are being moved to a new settlement system.
• Capacity and network charges. A large supply has an agreed capacity measured in kVA, and exceeding it can be expensive. Read supply capacity and kVA charges.

Warehouses sit between the two worlds: lighting, heating and forklift or EV charging rather than process loads. Food production adds refrigeration and process heat, which usually means a lot of gas and a high base load.

What does industry pay?

DESNZ's Quarterly Energy Prices (September 2026 edition) reports that in Q2 2026, April to June, the average non-domestic price including Climate Change Levy was 24.51p/kWh for electricity and 5.28p/kWh for gas. For manufacturing, excluding the levy, the provisional averages were 17.4p/kWh for electricity and 3.85p/kWh for gas. These are national averages; your price depends on your volume, load shape and contract.

Fuel (Q2 2026)	All non-domestic, incl. CCL	Manufacturing, excl. CCL (provisional)
Electricity	24.51p/kWh	17.4p/kWh
Gas	5.28p/kWh	3.85p/kWh

A worked example

A packing and processing factory uses 800,000 kWh of electricity and 1,500,000 kWh of gas a year. At the manufacturing averages excluding levy: electricity 800,000 × £0.174 = £139,200; gas 1,500,000 × £0.0385 = £57,750. Total £196,950 before the levy, standing charges, network items and VAT. A single 1p/kWh move on electricity is 800,000 × £0.01 = £8,000, and 1p on gas is £15,000, which is why contract timing and structure matter so much.

Climate Change Levy and Climate Change Agreements

The main levy rate is 0.801p/kWh from 1 April 2026 and 0.827p/kWh from 1 April 2027, the same for gas and electricity. On the example above: 800,000 × £0.00801 = £6,408 for electricity and 1,500,000 × £0.00801 = £12,015 for gas, a total of £18,423.

Sites in eligible energy-intensive sectors can join a Climate Change Agreement (CCA), arranged through their sector association and administered by the Environment Agency, committing to energy-efficiency targets in return for a reduced levy rate. The discount is 92% on electricity and 89% on gas for 2026-27. If our factory had a CCA: electricity levy £6,408 × 8% = £512.64; gas levy £12,015 × 11% = £1,321.65; total £1,834.29, a drop of £16,588.71. That is only an illustration, because eligibility depends on your sector and facility.

Government support: what exists and what is proposed

There is no general business bill-support scheme in 2026: the Energy Bills Discount Scheme ended on 31 March 2024. Support now is targeted.

• British Industry Supercharger. For energy-intensive industries, roughly 500 firms. The network charge discount rises from 60% to 90% from 2026, with an exemption from certain policy levies. Most small factories will not qualify.
• British Industrial Competitiveness Scheme (BICS). Aimed at manufacturers more widely, an estimated 7,000 to 10,000 firms, with support of up to £35 to £40 per MWh (up to about 25% of cost) via exemption from Renewables Obligation and Feed-in Tariff costs from April 2027 and Capacity Market costs from October 2027. As of the latest update we found, this was still proposed pending legislation, so do not budget on it yet.

Read who qualifies for BICS and energy-intensive industry support for current eligibility notes.

VAT on industrial energy

Industrial use is standard-rated at 20%. Most VAT-registered manufacturers recover it as input tax, so the cash cost is mainly the timing, but confirm with your accountant. See can I reclaim VAT on business energy?.

Buying strategy for bigger users

Bigger users often fall outside the extra protections. You are a microbusiness if any one test is met (fewer than 10 staff and turnover or balance sheet up to €2m; under 100,000 kWh electricity; or under 293,000 kWh gas a year), and a small business if any one small-business test is met (fewer than 50 staff and turnover up to £6.5m or balance sheet up to £5m; up to 200,000 kWh electricity; or up to 500,000 kWh gas). Only micro and small businesses can use the Energy Ombudsman, and the 12-month backbilling limit covers microbusinesses only. Our example factory is not micro or small on usage, though it could still count as small on staff and turnover, so check each test.

Options include a fixed price, a flexible or purchase-in-tranches contract where you build the price over time, or a pass-through contract where network and policy costs are billed at cost. Understand what you are taking on: flexible contracts can fall in price but can also rise. See multi-site and large business energy, non-commodity charges and fixed vs flexible.

Practical savings in the plant

• Fit sub-meters to find which line or machine uses what.
• Check your agreed capacity against your actual peak, since over-provision costs money.
• Shift flexible loads, such as charging or cold storage pre-cooling, away from peak periods if your contract rewards it.
• Audit compressed air leaks, lighting and heat recovery.

See business energy audits. Savings depend on the process, so treat any adviser's headline claim with caution.

Questions to put to a supplier or broker

• Which charges are fixed and which are passed through at cost, and what has happened to them year on year?
• How is my half-hourly profile priced, and is there a penalty for exceeding agreed capacity?
• What is the broker's total fee in pounds across the term, as shown in the Principal Terms?
• What happens at the end of the term if I miss the renewal window?

Write the answers down and compare them across offers. A cheaper headline rate with uncapped pass-through costs can end up dearer than a slightly higher fixed rate.

Next steps

1. Gather 12 months of half-hourly data and gas consumption.
2. Check whether your sector can use a CCA.
3. Decide a buying strategy before you talk to suppliers or brokers, and ask for the broker fee in writing.
4. Track BICS legislation before building it into forecasts.