We hear from UK battery storage developer-operators on the government’s recently released long-duration energy storage (LDES) consultation, which has proposed a cap and floor scheme to kickstart investment.
The chief proposal is a cap and floor mechanism for LDES projects which would guarantee a minimum and maximum revenue for projects, with the government funding any shortfall and receiving any money back above the cap.
“The cap and floor mechanism for LDES is a sensible evolution from the simpler strike price model of a Contract for Difference (CfD), which has proven to help get less mature technologies off the ground,” developer and operator Balance Power’s commercial manager Nick Provost told Energy-Storage.news.
“It’s likely to benefit consumers as asset operators will be able to gain more revenue before breaching the cap, compelling them to pay this extra revenue to the government. This should help provide downward pressure on the cost of the floor which is good for electricity consumers.”
Luke Gibson, COO at another developer-operator Field, similarly told us: “We welcome the launch of this consultation. It’s reassuring to see the recommendation for a cap and floor mechanism that – price dependent – should give greater revenue certainty, which will in turn help to secure financing for these assets.”
Lithium-ion exclusion ‘should be reconsidered’ for LDES
The aspect of the consultation that has been most widely opposed by industry figureheads is the proposed exclusion of lithium-ion as an eligible LDES technology for the cap and floor scheme. The government said this is because it is already commercially viable and being deployed at scale without any subsidies. Indeed, lithium-ion technology is being used for the vast majority of energy storage projects being deployed in the UK.
Field’s Gibson said: “However, the exclusion of existing lithium-ion technology at 6-hour duration should potentially be reconsidered if the goal is consumer savings. LFP (lithium iron phosphate) batteries remain cost competitive at this duration.”
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