The Long Duration Electricity Storage (LDES) Technical Decision Document (TDD), published by Ofgem and the Department for Energy Security & Net Zero (DESNZ) in March 2025, represents a significant step towards enabling investment in LDES in Great Britain. By introducing a "cap and floor scheme", akin to the interconnector regime, the government is attempting to create a financial framework that balances investor incentives with consumer protection. However, while this document lays the foundation for LDES deployment, key uncertainties remain regarding its long-term viability and implementation challenges.

A necessary intervention

The move towards long-duration energy storage is both logical and necessary. As Great Britain transitions to a power system with a higher proportion of renewables, the role of flexible storage solutions in maintaining grid stability and security of supply will be critical. Unlike traditional short-duration battery storage (e.g. lithium-ion), LDES technologies – whether pumped storage hydro (PSH), compressed air or liquid air storage – can store energy for eight hours or more (over a 25-year period without significant refurbishment or replacement), smoothing out the intermittency of wind and solar generation.

By providing a guaranteed minimum revenue (floor) and limiting excessive profits (cap), the proposed scheme addresses one of the biggest barriers to LDES deployment – investment uncertainty. Historically, developers have struggled to attract financing due to the inability to predict revenue flows from energy arbitrage and in longer-term capacity markets. The cap and floor arrangement provides a degree of certainty over a 25-year period that should encourage investment, while still ensuring that LDES operators are incentivised to participate in commercial power markets.

The need for further clarity and input?

The TDD is a welcome step in the right direction but there are areas where further clarity and direction is needed:

• Cap and floor levels and investor confidence

While the document outlines the two-stage assessment (eligibility and cost-benefit analysis) for LDES projects, there is no final decision on the exact approach to cap and floor rate calculation. Ofgem's "Guidance for the cap and floor scheme application: Long Duration Electricity Storage" issued on 8 April 2025 (the Guidance) offers no more detail on this. Ofgem plans to conduct further consultation on setting these financial parameters, which leaves developers in a state of uncertainty. Given that the financial model is central to project viability, delaying clarity on these key figures could hinder early development efforts.

• Refurbishments and cost allocation

The TDD rightly acknowledges that significant refurbishments and expansions of existing storage assets should be eligible for the scheme. The Guidance indicates that for significant refurbishments and expansions, projects must explain why the new capacity requires cap and floor regime support and cannot obtain adequate funding solely through merchant project financing or existing schemes such as the capacity market. However, how costs and revenues from these projects will be assessed remains unclear. With a 100MW new installed capacity threshold, developers could be incentivised to upgrade existing facilities to gain access to cap and floor support, rather than investing in innovative new builds.

• Grid connection challenges

The document touches on grid connection barriers but does not offer a concrete solution to ease the long interconnection delays plaguing renewable and storage projects. LDES developers will still face complicated and slow grid queue processes, potentially stalling deployment well beyond the 2030 targets outlined in government energy strategy documents.

• Consumer impact and cost recovery

While protecting consumers from excessive costs is a legitimate concern, the TDD does not sufficiently address long-term affordability. The mechanism guarantees developers a minimum level of financial return, but what happens beyond the 25-year support window? Will these projects continue to benefit from floor prices if they remain essential for grid stability? The review process for post-regime revenues suggests that Ofgem is wary of excessive developer profits, but details remain sparse.

The path forward

The TDD is a positive development, providing much-needed structure to the UK's strategy on LDES. However, to ensure that the cap and floor regime is effective, Ofgem must move quickly to provide greater clarity on financial parameters, cost eligibility and post-regime arrangements. Without this certainty, there is a risk that developers will remain hesitant, delaying critical infrastructure investments.

Additionally, Ofgem and DESNZ must engage more directly with industry stakeholders, particularly on grid connection reform and market incentives. The effectiveness of LDES is not solely dependent on financial support – it must be part of a broader strategy that includes market reform, infrastructure investment and streamlined planning processes.

In summary, Great Britain is heading in the right direction, but challenges remain. If Ofgem and DESNZ can address outstanding concerns over financial viability, cost oversight and long-term system resilience, the UK could become a global leader in long-duration energy storage, ensuring a stable, flexible and decarbonised power grid for decades to come.