What Is Embedded Generation? On-Site Power and What It Means for Your Energy Contract

Embedded generation is electricity generation located within or close to the distribution network — typically behind a business’s electricity meter, or connected at distribution voltage rather than at the high-voltage transmission network. Solar PV, battery storage, CHP, small wind turbines, and standby generators are all forms of embedded generation. Understanding what embedded generation is, and how it interacts with your electricity contract and network connection, is increasingly relevant as more UK businesses install on-site generation.

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Behind-the-meter generation

The most common form of embedded generation for UK businesses is solar PV installed behind the meter — the panels feed electricity directly into the building’s electrical system, reducing the amount drawn from the grid. The meter records only net imports. Behind-the-meter generation affects your energy procurement in two ways: it reduces your annual consumption from the grid, which affects your volume for contract pricing purposes; and it reduces your demand from the grid during peak generation periods, which can affect maximum demand readings on half-hourly metered supplies.

When procuring energy, declare your embedded generation to the supplier. A consumption profile with a significant daytime trough due to solar generation requires different profiling from a standard commercial customer, and a supplier that isn’t aware of it may misprice or mistariff the supply.

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Export: the grid connection decision

When embedded generation exceeds on-site consumption — typically during summer peak solar periods — surplus power can be exported to the grid. This requires an export meter, an export agreement with your DNO, and an export tariff arrangement with an electricity supplier or aggregator. Export arrangements range from the Smart Export Guarantee (a regulated minimum payment per kWh exported) to more sophisticated Power Purchase Agreements for larger systems. The export value is almost always lower than the import rate — the economics of solar PV for businesses are built on self-consumption, not export income.

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Embedded benefits

Generators connected to the distribution network at specific voltage levels may be eligible for embedded benefits — payments from network operators that reflect the value the generation provides to the local network by reducing the need for transmission capacity. These benefits have reduced significantly over recent years following Ofgem reviews, but remain relevant for larger commercial CHP and battery storage projects.

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Standby generators: the compliance point

Businesses with standby diesel generators need to be aware that running a generator in parallel with the grid requires specific grid connection approval from the DNO. Operating an unapproved parallel connection risks disconnection and potential liability. If your standby generator is old enough that it predates modern grid connection standards, check whether your connection agreement covers parallel operation.

Telnergy accounts for embedded generation when reviewing consumption profiles for procurement. If you have solar, CHP, or storage on site, tell us before we go to market — it changes the contract structure and the profiling conversation with suppliers.

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