The UK’s energy regulator has opened a consultation on the proposed introduction of a cap-and-floor regime for long-duration energy storage (LDES) projects.
The Department for Energy Security and Net Zero (DESNZ) asked Ofgem to regulate the minimum and maximum costs for projects by LDES developers in the same manner in which it has introduced cap-and-floor mechanisms for interconnector projects. Proposed minimum revenue for LDES developers will encourage development in the sector by helping developers manage the high upfront costs and long build times associated with LDES projects, while the cap on maximum profits keeps costs lower for consumers.
Ofgem is working in conjunction with DESNZ to publish a joint Technical Decision Document (TDD) by the end of the first quarter of 2025 and aims to approve the first LDES projects by Q2 2026. The first window of project approvals will focus on projects that can be delivered by 2030 in order to meet the UK government’s “clear desire” to achieve clean energy by 2030.
To ensure that the scheme works as well as possible for all stakeholders, Ofgem has opened the public consultation on the proposals, asking interested parties 14 key questions to establish priorities for the scheme. As well as more general questions on how application processes could be streamlined and on how costs can be best assessed, the call for evidence asks stakeholders their opinions on the precise level of the cap and floor, proposing a floor of 80% of a project’s costs, as well as proposals to require proof of planning permission for projects, and setting a minimum duration of ten hours for LDES projects.
Ofgem is also considering mandating that LDES cap and floor projects take part in the capacity market as price takers and bring their full capacity into auctions in the same manner interconnectors do.
The consultation is now open, and Ofgem will be accepting responses until 8 January 2025.
In her opening statement to the call for input, Beatrice Filkin, director of major projects at Ofgem said that stakeholder input was “vital” for driving the net zero transition, adding “Great Britain is at a pivotal point in its net zero journey.
“At Ofgem, we have a key role to play, working with the Government, industry and others, to improve our energy systems, markets and infrastructure. I am pleased to be able to now set out some of the actions we plan to take to speed up infrastructure delivery through our work on long-duration electricity storage.”
