Britain Utility Regulator Opens Applications for New LDES Investment Scheme

Britian’s Office of Gas and Electricity Markets (Ofgem) has opened applications under a new “cap and floor” scheme for so-called long-duration electricity storage (LDES) projects.

The scheme seeks to produce the first LDES facilities in Britain in 40 years by easing hurdles such as high costs. Currently Britain has 2.8 gigawatts (GW) of LDES capacity, from four pumped storage hydro facilities in Scotland and Wales, according to Ofgem.

The government sees LDES as key to achieving the United Kingdom’s goal of clean power by 2030 and net-zero emissions by 2050. “Long Duration Electricity Storage facilities provide vital back-up for the renewable power system - working like giant batteries that store electricity created by wind and solar farms, then release it to the grid when needed”, Ofgem said in an online statement.

The inaugural application window is offering 2.7-7.7 GW, an indicative range that the National Energy Systems Operator (NESO) recommended to be installed by 2035. The official target for 2050 is to reach 20 GW of LDES capacity.

“Producing one gigawatt constantly for a year is enough to power 2.65 million homes”, Ofgem said.

Developers applying in window 1 have two tracks. One is for projects that can go onstream 2030 and the other is for projects that will be delivered 2033. “Ofgem will prioritize decisions on projects that can deliver by 2030 if necessary”, the statement said.

The cap-and-floor scheme boosts “investor confidence with the security of providing minimum revenue for LDES operators to manage high start-up costs and long build times”, Ofgem said. “The scheme will ensure value for money by driving down costs, only allowing efficient projects with a storage capacity of more than eight hours.

“At the same time, the regime protects consumers with a cap on profits, meaning any excess revenues flow directly back to customers via their bills”.

The “cap” refers to the maximum revenue a project can earn. Excess revenue will be shared with consumers, Ofgem said.

The “floor” refers to the minimum revenue committed to the project. Consumers will shoulder the difference up to the floor level.

Besides pumped storage, Ofgem said, “Other technologies include liquid air energy storage, compressed air energy storage and flow batteries, which are currently in development and would benefit from investor support”.

Akshay Kaul, director-general for infrastructure at Ofgem, said, “By creating the confidence for investors to support new projects such as super-batteries capable of storing the extra electricity created when the wind blows hard and the sun shines strong, we can reduce the need to turn to fossil-fueled power as backup when the weather changes”.

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