P441 modification Q&A – March 2026

What is the P441 modification?

The P441 modification is a proposed change to the Balancing and Settlement Code which is overseen by Elexon and governs electricity trading.

P441 has been in development for more than two years and would put a concept of local energy markets, also known as complex sites, on a more robust regulatory footing. 

It would also simplify the process of setting up a local energy market and enable local generators connected at a different voltage to the consumers to enter these arrangements. This would allow more communities to benefit. 

P441 would also give regulatory certainty to licensed suppliers so they are more confident about investing to provide services to enable local energy. 

What stage is the P441 modification at?

After lengthy consideration and two consultations, the Elexon panel has now approved the modification for consideration by Ofgem.

That means it is now in the hands of Ofgem for a final decision later in 2026.
 

What are local energy markets?

Energy Local is an example of a local energy market. 

It is an arrangement that allows for trading between local electricity generators and local people. It provides a mechanism for them to agree a price for locally generated renewable power, benefitting both. 

This can also be used to incentivise more flexible and efficient use of local networks, freeing up capacity for more clean energy. 

‘Local energy markets’ provide the following potential benefits: 

• Lower bills for households and local businesses 

• A greater incentive for household smart meter adoption 

• Improved financial viability for more small-scale renewable generation 

• The creation of a mechanism for shifting demand away from peak times and better ‘balancing’, meaning local generation and demand are matched in real-time. This helps manage limited network capacity. 

How do local energy markets work?

All members of the arrangement must be connected under the same primary substation, and, under current rules, at the same voltage. 

A licensed supplier is needed to provide extra electricity and billing.

It is possible to create local energy markets under current regulations, but the P441 modification will make it much easier for more communities to benefit.

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