Cap and floor scheme to encourage development of Long Duration Electricity Storage

Announced today, October 10, 2024, new support for LDES is intended to boost investor confidence through the introduction of a cap and floor scheme that de-risks capital expenditure.

This could see the first significant long duration energy storage (LDES) facilities in nearly 40 years. 

Barriers to developing LDES include high upfront costs – despite low operating costs – that have hampered investment in this infrastructure.  

The cap and floor model would provide a guaranteed minimum income for developers, in return for a limit on revenues. Ofgem has agreed to act as regulator and delivery body and the scheme’s first round is expected to be open to applicants in 2025. 

Two application routes for the cap and floor scheme have been defined, with Stream 1 focusing on established technologies with a TRL of nine and Stream 2 focusing on more novel technologies with a TRL of eight.

The government confirmed that any technology type can apply for support for the LDES cap and floor on the basis that it meets the definition of electricity storage and the minimum stream eligibility criteria.

Commenting on the announcement, Sarah Long, Net Zero Energy Market director at AtkinsRéalis, said: “Long duration storage is a cornerstone of a net zero energy grid, and [these] plans are a welcome acknowledgement that the UK needs to bring forward the frameworks and incentives that will drive investment in new storage projects.

“Pumped storage hydro is a proven, reliable technology that has the potential to play a far greater role in balancing a net zero energy system with renewable power. The introduction of similar support schemes have been instrumental in driving record levels of investment in offshore wind into the UK, and [these] plans are a step in the right direction towards a rapid ramp up of storage capacity that will help to deliver on net zero targets and ensure a sustainable, secure energy supply for the future.”

According to the Department of Energy Security and Net Zero, the UK has 2.8GW of installed LDES across four pumped storage hydro schemes in Scotland and Wales, with a combined capacity of 24GWh. 

Analysis has found that deploying 20GW of LDES could save the electricity system £24bn between 2025 and 2050. The National Electricity System Operator has estimated that a total of 11.5 to 15.3GW of LDES will be required by 2050 to achieve net zero.