Agricultural businesses face structurally higher energy costs due to rural network constraints and high-load seasonal operations. The Renewable Heat Incentive closed to new applicants in 2021 but continues paying legacy recipients. On-farm solar PV and anaerobic digestion installations qualify for the Smart Export Guarantee for surplus generation. This guide covers the consumption profile and generation options for UK farm businesses.
Last reviewed: 12 May 2026
The Agricultural Energy Consumption Profile
UK agricultural businesses consume energy across a range of end-uses that vary significantly by farm type. DESNZ energy data for the agriculture sector includes arable, dairy, poultry, pig, and mixed farming operations, with significant variation in total consumption and fuel mix across these sub-types.
The primary energy categories in UK agriculture are:
- Grain drying: Arable farms with on-site grain drying operations use substantial quantities of gas, oil, or electricity for drying plant, particularly in wet harvest seasons. A continuous-flow grain drier on a large arable farm can consume significant quantities of gas or propane over a 4 to 8 week harvest campaign.
- Dairy refrigeration: Dairy farms cool bulk milk immediately after milking and maintain it at refrigerated temperature until collection. Milk cooling is a continuous electricity load running twice daily year-round. A 200-cow dairy herd may consume 60,000 to 100,000 kWh of electricity annually on milk cooling alone.
- Poultry housing: Broiler and egg-laying units require precise temperature, ventilation, and lighting control. A standard broiler shed for 40,000 birds uses heating, ventilation fans, and lighting continuously through each 35-42 day production cycle. Electricity and heating fuel costs are among the largest variable costs in poultry production.
- Irrigation: Arable and horticultural businesses with irrigation infrastructure use electricity-driven pumping systems during dry periods. Irrigation electricity demand is seasonal and concentrated in summer months.
- Milking parlour and robotic milking: Milking equipment, vacuum pumps, and washing systems account for significant electricity consumption on dairy farms. Robotic milking systems run continuously and have higher base electricity loads than conventional parlour systems.
Why Rural Energy Rates Are Higher
Agricultural businesses frequently face higher electricity unit rates than urban commercial customers. The primary cause is network cost allocation. Rural electricity distribution networks serve low densities of customers over long distances. The fixed costs of maintaining these networks are spread across fewer customers than in urban areas, resulting in higher Distribution Use of System (DUoS) charges per kWh.
DUoS charges form a component of the unit rate or standing charge on electricity bills and vary by Distribution Network Operator (DNO) region and by the voltage level at which a customer takes supply. Rural customers on the domestic-scale network (low voltage) typically face higher DUoS costs than equivalent urban customers.
For agricultural businesses with very high electricity consumption, taking supply at higher voltage (11kV or 33kV) can reduce DUoS costs by bypassing part of the distribution network. This is relevant for large-scale poultry operations, significant irrigation installations, and farm-based food processing. The capital cost of the on-site transformer and associated infrastructure must be weighed against the long-term unit rate saving.
Some rural agricultural premises are not connected to the gas distribution network. Off-grid farms use heating oil, liquefied petroleum gas (LPG), or solid fuel for space heating and process heat. These fuels are subject to commodity price volatility and do not benefit from the same level of supplier competition as mains gas.
The Renewable Heat Incentive: Legacy Payments
The Renewable Heat Incentive (RHI) was a government scheme that paid renewable heat generators - including farm businesses with biomass boilers, biogas heating, and solar thermal installations - a tariff per kWh of heat generated from eligible renewable sources.
The domestic and non-domestic RHI schemes closed to new applicants in 2022. Ofgem administered the non-domestic RHI. Farm businesses that installed eligible renewable heat systems before the closure date and received accreditation are continuing to receive RHI payments for the duration of their 20-year payment term. The obligation to pay existing recipients continues regardless of scheme closure.
For farm businesses currently receiving non-domestic RHI payments, key obligations include ongoing meter reading submission, maintaining the accredited installation in compliant operation, notifying Ofgem of any changes to the installation or ownership, and complying with metering and monitoring requirements. Failure to meet these obligations can result in payment suspension or recovery of overpaid amounts.
For farm businesses that did not enter the RHI before closure, the scheme is no longer available. Replacement support for renewable heat in the non-domestic sector is being developed through the government's Heat Pump Investment Roadmap and wider industrial decarbonisation strategy, but equivalent direct subsidy has not yet replaced the RHI for the agricultural sector.
On-Farm Solar PV
Agricultural buildings offer large roof and ground areas that are well-suited to solar PV installation. Barn roofs, polytunnel structures, and open ground areas are all potential installation sites. Ground-mounted agrivoltaic systems that combine solar generation with agricultural use of the same land area are an emerging model in the UK.
Solar PV economics for farm businesses depend on the alignment between generation profile and on-site consumption. A dairy farm with continuous electricity consumption for milking, cooling, and robotic systems has a high proportion of solar generation that can be self-consumed during daylight hours, displacing grid electricity at the current unit rate. An arable farm with low base load electricity consumption and high seasonal demand (irrigation, drying) may have a lower self-consumption rate and greater dependence on export revenue.
The Smart Export Guarantee (SEG), administered by Ofgem, requires larger licensed electricity suppliers to offer export tariffs to eligible small-scale generators who export surplus electricity to the grid. SEG export tariffs are set by individual suppliers and are not government-guaranteed in terms of rate. Farm businesses installing solar PV should obtain SEG accreditation from Ofgem and register with a licensed SEG licensee to receive export payments for surplus generation.
Anaerobic Digestion
Anaerobic digestion (AD) converts organic material - slurry, manure, food waste, crop residues - into biogas, which can be used for heat and power generation via a combined heat and power (CHP) unit, or upgraded to biomethane and injected into the gas grid.
Farm-based AD is well-established in UK agriculture, particularly on dairy and pig units with significant slurry volumes. DESNZ has supported AD through various funding programmes and policy frameworks. AD installations require significant upfront capital but can generate electricity for on-farm use, export, and heat for farm buildings and processes.
AD is a complex project requiring planning permission, environment agency permits (for accepting waste materials), and potentially grid connection upgrades for electricity export. The financial case depends on feedstock availability, gas grid connection (for biomethane injection), power purchase arrangements, and operational costs.
Farm businesses considering AD should obtain independent project development advice from specialists with UK agricultural AD experience before committing to capital expenditure.
Smart Export Guarantee
The Smart Export Guarantee, established under the Energy Act 2008 provisions implemented from January 2020, requires licensed electricity suppliers with more than 150,000 domestic customers to offer an export tariff to eligible small-scale generators. Farm businesses with solar PV, wind turbines, hydro, or AD-CHP installations below 5 MW are eligible.
Ofgem administers SEG accreditation. The export tariff must be greater than zero but the rate is set competitively by each licensee. Rates vary across suppliers and may be fixed or variable. Farm businesses should compare available SEG rates from multiple licensees before registering, and review rates periodically as they can change.
Export metering is required for SEG payment. For farms with existing generation installations predating SEG, upgrading to export metering may be necessary to access SEG payments.
Editorial disclaimer: This page provides general guidance only and does not constitute energy, financial, or legal advice. RHI payment obligations, SEG rates, and government support schemes change. Always verify current obligations and rates directly with Ofgem, DESNZ, and your energy supplier.
Frequently asked questions
Why do rural farm businesses pay higher electricity rates than urban businesses?
Rural electricity networks serve fewer customers over longer distances than urban networks. The fixed costs of maintaining rural distribution infrastructure are spread across fewer customers, resulting in higher Distribution Use of System (DUoS) charges per kWh. These charges form part of the unit rate or standing charge on electricity bills and are determined by the regional Distribution Network Operator.
The RHI scheme is closed - can I still receive payments if I was already on it?
Yes. Farm businesses that received non-domestic RHI accreditation before the scheme closed continue to receive payments for the duration of their 20-year payment term. Ongoing obligations include meter reading submission, maintaining the installation in compliant operation, and notifying Ofgem of any changes. Failure to comply can result in payment suspension or recovery action.
What is the Smart Export Guarantee and how does a farm business apply?
The Smart Export Guarantee requires licensed electricity suppliers above a threshold size to offer export tariffs to eligible small-scale generators exporting surplus electricity to the grid. Farm businesses with eligible generation technology (solar PV, wind, hydro, AD-CHP) below 5 MW capacity can apply for SEG accreditation through Ofgem and then register with a licensed SEG supplier to receive export payments.
Is on-farm solar PV financially viable for agricultural businesses?
The financial case for on-farm solar depends on the alignment between generation profile and on-site consumption. Farms with high continuous electricity loads (dairy, poultry) typically achieve higher self-consumption rates, displacing expensive grid electricity. Farms with lower base loads and high seasonal demand have lower self-consumption and depend more on SEG export revenue. An independent generation assessment with site-specific consumption data is necessary for a reliable financial appraisal.
What is anaerobic digestion and is it suitable for my farm?
Anaerobic digestion converts organic material such as slurry, manure, and crop residues into biogas for heat and power generation or biomethane for grid injection. It is well-established on UK dairy and pig units with significant slurry volumes. AD requires significant capital investment, planning permission, environment agency permits, and potentially grid connection upgrades. Independent specialist advice is essential before committing to capital expenditure.
How we verified this
This article draws on the published guidance from Ofgem, the Department for Energy Security and Net Zero, and the relevant primary legislation listed in the Sources section. No aggregator or supplier-produced content was used as a primary source.
