BICS could take up to £40/MWh out of the business case for factory solar

The government accepts its new industrial scheme may reduce the incentive to invest in onsite generation, and has chosen to monitor the effect rather than alter the design

Meridian Trade Advisory. 16 August 2026

The British Industrial Competitiveness Scheme relieves three levies: the Renewables Obligation, the Feed-in Tariff and Capacity Market charges. Each is charged per megawatt hour on electricity a business buys from the grid, so the relief is proportional to grid imports, not to how much electricity a site uses. The government considered using total site consumption and rejected it, and it sized the scheme the same way.

The consequence follows directly. Once a site is certified, its grid electricity becomes £35 to £40 per MWh cheaper, so every megawatt hour it generates itself avoids less than it did, because the electricity it competes with now costs less.

What that is worth in money

Take a manufacturer consuming 10 GWh a year, of which 2 GWh is generated onsite and 8 GWh is imported. Its BICS relief applies to the 8 GWh: at £35 to £40 per MWh, that is £280,000 to £320,000 a year.

An otherwise identical site buying all 10 GWh from the grid receives £350,000 to £400,000.

The £70,000 to £80,000 gap is how much BICS reduces the avoided-cost value of those onsite units. It assumes the 100 per cent pro-rating band and full supplier pass-through: halve it at the 50 per cent band, and pass-through remains at the supplier’s discretion.

What it is not

That is not money taken away. Onsite units never incurred the levies, so there is nothing to exempt on them and no entitlement is being withheld.

What has changed is the counterfactual. The grid electricity onsite power competes with is now cheaper, so each onsite megawatt hour saves less. That applies to investments already made, and it matters most for the ones being planned now.

The government has acknowledged this

At question 6 of the July response, respondents described a double disincentive for sites that had already invested in behind-the-meter solar, storage and corporate power purchase agreements. The government accepted that BICS may reduce the incentive to invest in onsite or private wire generation, argued that residual value remains in avoided wholesale, network and supplier costs, and said it would monitor.

At question 9, respondents also warned that the design could work against the government’s own Solar Roadmap. The government did not accept that contradiction, but it conceded the narrower point and chose to monitor the effect rather than alter the scheme.

Why it matters at scale

DUKES 2026 records industrial electricity bought from the grid at 64.4 TWh in 2025; in 2005 it was 96.5 TWh. Self-generation now supplies 16.0 per cent of the electricity British industry uses, a share back near its 2005 level but on a different technology base: coal has gone, gas has more than halved, and other fuels, including renewables, now supply half of what the remaining fleet burns. The growth is landing in the industries BICS targets: measured against 2015, electricity consumed from own generation is up 40 per cent in chemicals, 41 per cent in paper and printing, and 53 per cent in other manufacturing.

Self-generation did not cause that fall in grid purchases. Total industrial consumption fell too, to its lowest level since 1983. The point is simpler: BICS arrives in an industrial electricity system where a material share of consumption already sits outside its levy-bearing base, and the design gives manufacturers a reason to keep it there.

What to do with this

BICS is unequivocally valuable to eligible manufacturers. But any business evaluating solar, private wire supply or a corporate PPA should not model that investment at today’s grid price: the levy-avoidance component of onsite generation’s value falls by up to £35 to £40 per MWh once the scheme applies, scaled by the band and by what the supplier passes through. For some projects, that changes the decision.

If you have onsite generation, or any in the capital plan, rerun the investment case at the post-BICS price before committing either way. That is what the readiness audit models: /bics-readiness-audit

Sidebar: the 33 MWh threshold

Eligibility requires at least 33 MWh of grid imports a year, so a site generating some of its own power can fall below a line its fully grid-supplied twin would clear. At the industrial average self-generation share of 16 per cent, only sites consuming around 39 MWh or less in total are exposed; at 30 per cent, the exposure reaches about 47 MWh. These are illustrations, not estimates of how many businesses are affected. DBT considers 33 MWh low enough that genuinely eligible businesses are unlikely to be excluded in practice, it said at question 1 of the same response, a policy judgement with nothing published to evidence it either way.

What to watch in the guidance

Three things. How onsite generation will be measured and allocated between eligible and ineligible activity when the pro-rating share is calculated. Whether material changes in onsite generation or grid-import patterns must be declared. And how the Year 2 review treats a site whose generation mix has changed since certification.

Sources

The levy structure, the grid-import basis and the rejection of total site consumption are from the Government response to the BICS consultation on scheme eligibility and approach, 16 April 2026. The consultation exchanges cited at questions 1, 6 and 9, including the double disincentive, the Solar Roadmap passage and the monitoring commitment, are from the Government response on regulatory changes and scheme delivery, 8 July 2026. Electricity figures are from the Digest of UK Energy Statistics 2026, Tables 5.2 and 5.4, published 30 July 2026. The worked example and the threshold scenarios are illustrative and use DBT’s published £35 to £40 per MWh valuation, subject to the conditions stated in the text.

If you think I have got something wrong, tell me and I will correct it.

Anthony Salasidis is the founder of Meridian Trade Advisory, which advises UK manufacturers on BICS eligibility, pro-rating and evidence. anthony@meridiantradeadvisory.co.uk