UK Launches Cap-and-Floor Scheme to Unlock Investment in Long Duration Energy Storage

The UK energy regulator Ofgem has opened the first application window for long duration electricity storage (LDES) projects under its new cap-and-floor regulatory regime, marking a significant step in unlocking private investment for grid-scale energy storage.

Developed in collaboration with the Department for Energy Security and Net Zero (DESNZ) and the National Energy System Operator (NESO), the scheme aims to address longstanding barriers to LDES development by setting a minimum revenue floor and a profit cap. This model, previously used for interconnector projects, helps developers manage high upfront costs and long build times while ensuring value for energy consumers.

Applications are now open for developers that can bring LDES projects online by 2030 or 2033 to support the government’s Clean Power 2030 goal. The deadline for submissions is June 9, 2025, with the first project approvals expected by the second quarter of 2026.

Eligible projects must have a minimum storage duration of eight hours at continuous rated power. Technologies such as pumped hydro and advanced lithium-ion systems are expected to qualify under the scheme. Projects will be split into two streams: larger, mature technologies and smaller, emerging ones.

The UK has not built new long duration storage infrastructure in over four decades, but analysis shows that reaching 20GW of LDES by 2050 could save the electricity system up to £24 billion. NESO has called for between 2.7GW and 7.7GW of new storage capacity by 2035 to balance increasing volumes of intermittent renewable generation.

Industry response has been largely positive. RenewableUK’s senior policy analyst Yonna Vitanova called the scheme “an important milestone,” noting that it could enable several shovel-ready projects to advance. She added that systems like pumped hydro are essential to delivering reliable, low-cost power for UK billpayers.

Further details, including application guidance, are available in the technical decision document published in March.

For more, please visit: ofgem

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