How Capacity Market Charges Impact Manufacturers — And What You Can Do About It

The capacity market charge plays a vital role in Britain’s electricity security strategy—it ensures there’s enough standby electricity to meet surge demand, especially during peak periods. While this helps keep the lights on, it also adds complexity and cost to energy bills that manufacturers can’t afford to ignore.

What Are These Charges and How Do They Work?

Capacity market charges appear on your electricity invoice under non-commodity items—often labeled as “system charges.” They consist of two main components:

• Obligation Costs: Covering the costs of running the capacity auction, these are charged based on estimated energy usage (EACV) during peak hours (4–7 pm, November–February). They’re billed on a forecast, then reconciled against actual consumption.
• Operational Costs: Reflecting administrative expenses, these are charged monthly from April to March and reconciled the following November.

For manufacturers with high, inflexible energy usage during peak times, these charges can quickly add up.

Why This Really Matters for Manufacturers

• Bottom-line impact: Even slight shifts in charges can amount to thousands—or more—across multiple sites.
• Forecast instability: With demand-based pricing and variable reconciliation, surprise invoices can disrupt budgets and cash flow.

How Manufacturers Can Get Ahead

Here’s how to take control and turn this cost into a competitive advantage:

1. Load Shifting & Peak Avoidance Move non-essential, energy-intensive operations away from peak hours.
2. Demand-Side Response (DSR) Reduce or shift usage when the grid is under stress—unlocking cost savings and incentives.
3. Check for Exemptions or Relief Some industries may qualify for partial or full exemption. Reviewing eligibility regularly is key.
4. Monitor & Forecast with Precision Use real-time energy insights to track usage and make data-driven decisions.
5. Validate Your Invoices Regular audits help ensure you’re not overpaying and can recover errors where they occur.

Turning Complexity into Advantage

Capacity market charges might look like a small line item on your bill, but their impact on profitability is significant. With the right approach—including operational data, expert support, and smarter energy planning—you can minimise or even eliminate these costs, and potentially transform them into revenue opportunities.

At GLEG, our mission is to cut through the complexity of energy invoices and deliver smarter, more cost-effective strategies for manufacturers. If you’d like tailored advice on tackling capacity market charges, get in touch with us at hello@gleg.co.uk.