UK regulator reveals criteria of LDES cap-and-floor scheme

Details of a new cap-and-floor scheme to support long duration energy storage (LDES) in the United Kingdom have been revealed, including significant decisions on eligibility criteria.

Ofgem has confirmed that the cap-and-floor scheme will be open to LDES assets that can provide power for eight hours or more, up from a six-hour duration put forward in earlier proposals. The energy sector regulator has also committed to a 100 MW minimum capacity for its “stream 1” application round, followed by a 50 MW minimum for “stream 2”.

The stream 1 round will be open to well-established storage technologies that meet Ofgem’s technology readiness nine (TRL9) criteria. The second will be open to TRL 8 technologies.

TRL 9 is generally defined as a marketable product that has been proven in repeated use, such as lithium-ion batteries. TRL 8 technologies are those with final design and features set and, for LDES, Ofgem wants to see an installed working example of the technology that is at least 1 MW in size.

The regulator said that its current understanding of LDES suggests technologies such as liquid air electricity storage (LAES), compressed air electricity storage (CAES) and flow batteries will “come forward with a TRL of 8 and be assessed in stream 2.”

Ofgem also confirmed lithium-ion battery storage will be eligible to apply for the scheme, however lithium-ion batteries will not be classified at LDES under the UK government’s Clean Power 2030 plan for boosting renewables deployment. This means lithium-ion batteries will be viewed separately from LDES during the grid connection process.

Ofgem notes that although lithium-ion batteries have “not strictly been used in longer duration applications” the government and regulator expect long-duration applications to be “sufficiently similar.”

The UK government first announced a cap-and-floor scheme for LDES in October 2024, with the intention of opening the first round of applications in 2025. Cap-and-floor schemes operate by providing revenue support to developers should their annual gross margin – the difference between the revenues from selling electricity back to the grid and the cost of charging – fall below a set floor level.

Other eligibility criteria include producing cost estimates. Evidence of upfront engineering, and evidence that a grid connection application has been submitted. Projects must also have planning consent in place by the start of the project assessment phase, scheduled for the third quarter of 2025.