UK will implement cap-and-floor mechanism for long-duration energy storage from 2025UK will implement cap-and-floor mechanism for long-duration energy storage from 2025

The UK’s Department for Net Zero and Energy Security (DESNZ) has confirmed a new scheme today (10 October) aiming to stimulate investment in the country’s long-duration energy storage (LDES) sector.

According to the government department, the new support scheme, in the form of a cap-and-floor mechanism, will “remove barriers which have prevented the building of new storage capacity for nearly 40 years”.

The UK’s energy regulator, Ofgem, is set to design and deliver the first round of a cap-and-floor mechanism for LDES technology.

Following a consultation period held at the start of the year, Ofgem will implement the proposed cap-and-floor mechanism. This mechanism aims to overcome the barriers to LDES deployment that exist today, the main one being a lack of available revenue streams for LDES applications that can cover the high investment needed.

This mechanism would provide revenue certainty for investors by guaranteeing revenues above an agreed floor and offer protection to consumers by limiting revenues to an agreed cap.

The investment support scheme will be split into two application routes, one focusing on mature technologies and the other on new innovation. DESNZ confirmed the first round of the cap-and-floor model is expected to be open to applicants in 2025.

Commenting on the cap-and-floor mechanism, Beatrice Filkin, director of major projects at Ofgem, believes unlocking investment in LDES will be “another significant step towards the decarbonisation of the power system”.

LDES in the UK

Increasing the UK’s LDES capacity will also protect the country from volatility within the wholesale market, as seen with the recent energy crisis caused by inflated oil and gas prices following the invasion of Ukraine from Russia.

Indeed, bolstering the country’s energy security was a key manifesto for the new Labour government in the build-up to its election campaign earlier this year, which the political party won. Since then, several landmark policies and decisions have been introduced to bolster the UK’s renewable energy capabilities.

Michael Shanks, the UK’s energy minister, said that alongside solar PV and wind generation, the country must increase its energy storage capabilities, highlighting that the new scheme will help the Labour government’s goal of making the UK a “clean energy superpower”.

“We’re reversing a legacy that has seen no new LDES built for 40 years – and taking steps to unleash private investment in both established and new technologies,” Shanks said.

“With these projects storing the surplus clean, homegrown energy produced from renewable energy sources, we can boost our energy security by relying less on fossil fuels, protect household bills, and help deliver our key mission to make Britain a clean energy superpower.”

The full version of this article, including commentary from the developer of the UK’s largest PHES project, can be read on our sister site, Energy-Storage.News.