Ofgem Licensing and Exemptions: Practical Routes to Market for Small UK Generators

Ofgem regulates licences for generation and supply but recognises that very small generators operate differently from large licensed plants. A generation licence is required for entities generating electricity for supply to others except where an exemption applies. Exemptions and registrations exist to reduce the regulatory burden for small-scale and distributed generation, but they carry specific conditions and obligations that affect commercial choices.

Practical considerations for small projects include metering arrangements, export and import measurement, settlement obligations and the contractual pathway to sell output (for example via a supplier, an aggregator or a bespoke PPA). Where projects rely on balancing or flexibility markets they commonly participate through third-party aggregators who manage market access and compliance. Distribution network operators (DNOs) and now distribution system operators (DSOs) are responsible for local connection terms and may impose constraints or requirements that affect dispatch and curtailment risk.

Ofgem’s licensing framework also interacts with government support schemes and supplier obligations; eligibility for schemes or certain tariffs can depend on metering, accreditation and contractual form. Compliance with licence conditions or exemption terms is therefore an operational priority for small generators; breaches can limit market access or lead to enforcement action.

For retail investors in fractional renewable projects, the licensing and registration choices made by project sponsors determine how revenues are secured and how operational responsibilities are allocated. Due diligence should include confirmation of licence/exemption status, metering and settlement arrangements, and whether the revenue model depends on third-party aggregators or direct market participation.