UK: Cap and floor support confirmed for long-duration energy storage

The technology-agnostic regime will provide financial support to projects that would otherwise not be able to progress, provided they meet the definition of “stored energy” (as set out in the Energy Act 2023) and the minimum eligibility criteria. The cap and floor mechanism will apply to consist of two routes to application:

• Stream 1 – projects with a minimum capacity of 100MW for established technologies with a Technology Readiness Level (TRL) of 9;
• Stream 2 – projects with a minimum capacity of 50MW for novel technologies with a TRL of 8 (both the minimum capacity level and the TRL are under consideration and will be confirmed in the Technical Decision Document).

The intention is that the support will ensure revenue certainty for investors (floor) and a maximum limit on revenues to avoid excessive returns (cap).

Ofgem will be the investment framework delivery body for LDES and will be responsible for administering the scheme, as well as providing further information and support to the government on the outstanding issues to be addressed.

Other key elements of the regime include:

Duration – the government confirmed it preference for a minimum duration of 6 hours for both streams, despite a slight majority of respondents disagreeing with this limit. The government will, however, undertake further modelling to determine the impact of increasing this and will confirm its position in the Technical Decision Document to be published Winter 2024.
Overall capacity – DESNZ do not believe that setting an overall capacity target for the LDES is required at this stage, however will provide indicative ranges to Ofgem for each allocation round of the cap and floor scheme.

Minimum efficiency rating – responding to the strong disagreement from respondents to the suggestion of including a minimum efficiency rating in the assessment criteria, the government confirmed that it is not minded to include a “blunt minimum” to avoid excluding projects that would otherwise qualify on other merits.

Length of support – subject to final confirmation in the Technical Decision Document, the cap and floor support is intended to be available either for the project duration up until the first refurbishment, or up to 25 years.

It is intended that the application window for the cap and floor regime will be open to applicants at some point during 2025, although the exact timetable has not yet been confirmed.

The response also confirms that LDES projects receiving support will also be able to participate in the Capacity Market, although the government is giving further consideration to any possible parameters to apply to such participation.

What should I do?

Developers with eligible projects should start to consider their projects in light of the eligibility criteria set out in the government’s response document. There will be further detail provided in the Technical Decision Document and the pre-qualification assessment information.

Get in touch with a member of our team if you want to discuss an existing or potential project that may be able to benefit from the LDES scheme.

What else do I need to know about the LDES cap and floor regime?

The government’s response is not the complete picture as to how the regime will work in practice. During Winter 2024, a Technical Decision Document will be published, providing the detail on remaining questions. In addition to this, there will be further confirmation of the final design of the cap and floor support regime provided before the first application window opens.

Further reading on

Long duration electricity storage consultation: Government Response