Introduction

Ofgem has opened the first application window for the Long Duration Electricity Storage (LDES) cap and floor scheme, running from 8 April to 9 June 2025. This initiative is part of the UK government's strategy to encourage investment in energy storage technologies that can capture excess electricity from renewable sources and release it during periods of high demand, contributing to a more secure, cost-effective and low-carbon energy future.

Background and purpose

The LDES scheme was introduced by the government in October 2024 to support the development of storage technologies, such as pumped storage hydropower, that can help balance the grid as renewable energy sources increase. Government studies suggest that LDES could save the energy system and consumers up to £24 billion by 2050.

The cap and floor scheme provides a minimum revenue guarantee (floor) for LDES projects while capping maximum returns, helping developers manage high capital costs and long build times while protecting consumers.

Application process

The application process consists of several key stages:

• Eligibility Assessment Stage: Projects will be evaluated against six criteria outlined in the Technical Decision Document (TDD).
• Cost Benefit Analysis (CBA) Stage: Eligible projects will undergo a detailed assessment of costs and benefits with support from the National Energy System Operator (NESO).
• Cap and Floor Awards: Final decisions on which projects will receive support under the scheme.

Key dates

The key dates for Window One applications are as follows:

• 8 April 2025: Application window opens
• 22 April 2025: Deadline for notifying Ofgem of intent to apply
• 9 June 2025: Application deadline
• Q3 2025: Eligibility assessment decision publication
• Q3/Q4 2025: Submission of detailed cost information for CBA
• Q1 2026: CBA and consultation on project assessment results
• Q2 2026: Cap and floor awards

Eligibility criteria

Projects must meet several eligibility criteria to qualify for the scheme:

• Deliverability: Projects must demonstrate a credible plan for completion by either 2030 (Track 1) or 2033 (Track 2).
• Grid connection: Evidence of a submitted grid connection application or a firm grid connection offer.
• Planning consent: For Track 1 projects, evidence of ability to secure planning consent in required timescales. For Track 2 projects, evidence that planning consent will be in place by Q3 2025.
• Minimum capacity: Evidence that the scheme can maintain a minimum discharge capacity of at least 100MW (stream 1) or 50MW (stream 2).
• Duration: Evidence that the scheme can discharge power continuously at full capacity for at least eight hours.
• Technological readiness: Projects must be at Technological Readiness Level (TRL) 8 or 9.

Twin track approach

Ofgem intends to assess projects deliverable by 2030 (Track 1) and 2033 (Track 2) at the same time during the eligibility stage. However, for the CBA stage, Ofgem may use a "twin track" approach if needed.

Cost submission requirements

While detailed cost assessment is not required at the eligibility stage, developers need to provide cost estimates compatible with "Class IV" cost estimates guidance provided by the Association for the Advancement of Cost Engineering (AACE) or equivalent.

At the CBA assessment stage, developers of eligible projects will need to submit more detailed costs in a template provided by Ofgem.

Competition process for cap setting

Ofgem is considering using competition to set the cap, but this will only be adopted if it offers better value for money for consumers.

For eligibility applications, developers are expected to propose their target project Rate of Return (RoR) at the cap, specific to their project, and justify its appropriateness.

Future windows

Ofgem aims to inform stakeholders in Q1 2026 about the expected timing for opening application Window Two, based on advice from NESO.

The approach will be flexible, prioritising alignment with the Strategic Spatial Energy Plan (SSEP), with a contingency plan to open Window Two independently if the targets for Window One are not met.

Conclusion

The LDES cap and floor scheme represents a significant step in the UK's transition to a cleaner energy system. By providing revenue certainty for storage projects, the scheme aims to encourage investment in technologies that can help balance the grid as renewable energy sources increase, contributing to the government's goal of making Britain a clean energy superpower and achieving the Clean Power 2030 objectives.