Ofgem Launches Long-Duration Electricity Storage Scheme to Revolutionise the UK Energy Market
What Is the Long-Duration Electricity Storage Scheme?
The Long-Duration Electricity Storage (LDES) scheme, recently launched by Ofgem, marks a transformative step in the UK’s energy strategy. This initiative introduces a “cap and floor” regulatory framework designed to incentivise investment in large-scale energy storage projects. These projects aim to store electricity for extended periods—ranging from several hours to days—and release it during peak demand or when renewable energy output is low.
LDES technologies, such as pumped hydro storage, compressed air energy storage, and advanced battery systems like flow batteries, are critical for balancing supply and demand in a grid increasingly reliant on renewable energy. By addressing the intermittency of wind and solar power, LDES ensures grid stability while reducing reliance on fossil fuels.
How Does the Cap and Floor Model Work?
The cap and floor model is a financial mechanism that balances risks and rewards for developers while safeguarding consumer interests. Under this scheme:
- Floor: If project revenues fall below a set minimum, consumers will subsidise developers to cover the shortfall.
- Cap: If revenues exceed a maximum threshold, the surplus is returned to consumers.
This approach provides revenue certainty for developers, making high-capital projects more viable. The scheme also ensures that consumers are not overburdened by excessive costs. Projects will be subject to this framework for 20–25 years, aligning with their long-term investment nature.
Why Is LDES Crucial for the UK’s Energy Transition?
The UK government has identified LDES as a cornerstone of its Clean Power 2030 Action Plan. As the nation moves toward net-zero carbon emissions by 2050, the need for reliable energy storage solutions has become paramount. LDES enables:
- Grid Resilience: By storing surplus renewable energy and dispatching it during shortages, LDES reduces reliance on fossil fuel backup systems.
- Cost Efficiency: Stored energy can be released when electricity prices are high, lowering overall system costs.
- Decarbonisation: By integrating more renewable energy into the grid, LDES supports the UK’s climate goals.
What Technologies Are Included in the Scheme?
Ofgem’s scheme encompasses a range of innovative storage technologies:
- Pumped Hydro Storage: Uses renewable electricity to pump water uphill into reservoirs, which is later released to generate power.
- Compressed Air Energy Storage: Compresses air into underground caverns and releases it to drive turbines.
- Flow Batteries: Advanced battery systems capable of storing large amounts of energy over extended periods.
These technologies are pivotal for addressing seasonal variations in renewable energy availability.
What Are the Key Milestones of the Scheme?
The first application window for LDES projects under this scheme is now open, with submissions due by 9 June 2025. Eligible projects should aim to be operational by 2030 or 2033 to align with government targets. Ofgem expects to approve initial projects by Q2 2026.
Developers must undergo rigorous cost-benefit analyses to ensure their projects provide value to both investors and consumers. Public consultations on these frameworks will further refine the evaluation process.
How Does This Compare to Previous Initiatives?
This is the first major investment in large-scale electricity storage in over 40 years. While similar cap and floor schemes have been applied to electricity interconnectors since 2014, this marks its debut in the storage sector. The tailored approach reflects LDES’s unique challenges, such as high upfront costs and long payback periods.
What Are the Wider Implications of This Scheme?
The launch of this scheme signals a broader commitment to innovation in renewable energy infrastructure. By unlocking billions in funding for LDES projects, Ofgem is paving the way for a more sustainable and secure energy future. This initiative also positions the UK as a leader in clean energy technology development.
For homeowners and businesses interested in renewable solutions like solar PV systems, this development underscores the growing importance of integrating storage capabilities. At Atlantic Renewables, we specialise in designing solar PV systems that complement emerging storage technologies.
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If you’re considering installing a solar PV system or upgrading your existing setup with advanced battery storage solutions, Atlantic Renewables is here to help. Contact us at 0161 207 4044 today and let our team of experts guide you toward a sustainable energy future!
