UK parliament approves long duration storage cap and floor scheme

A cap-and-floor scheme must be introduced to support UK long-duration energy storage (LDES) “as soon as is reasonably practical” as a major planning and infrastructure bill comes into force.

The Planning and Infrastructure Act 2025 has received royal assent, meaning the bill has completed all parliamentary stages. Significant changes to the laws governing electricity in the United Kingdom have been made as a result, including measures to support storage deployment and grid upgrades while compensating homes affected by new transmission infrastructure.

The UK government first announced it would introduce a cap-and-floor scheme to support the rollout of LDES in October 2024, and the window for applications opened on April 8, 2025. Modelled on existing support for UK interconnectors, the scheme guarantees investors receive a minimum amount of revenue for their LDES asset in a bid to unlock investment. If revenues fall below “floor” levels, then the project owner will have their income topped up, while also committing to pay back any surplus revenue should prices exceed the “cap.”

A total of 171 bids were made in the first application window and an Ofgem spokesperson confirmed to ESS News in June that this would suggest there “should be sufficient capacity” to meet potential LDES targets set by grid operator NESO when it publishes its Strategic Spatial Energy Plan in 2026.

Minister for Energy Michael Shanks MP wrote an open letter to the energy industry as the new planning and infrastructure law came into force reiterating that the scheme is “technology neutral” and is designed to give the market confidence to invest, without “undue risk to consumers.” Eligible storage technologies include lithium-ion battery energy storage systems (BESS) and other batteries provided they can deploy for eight hours, along with pumped storage hydro, compressed air energy storage, and liquid air energy storage. 

Shanks noted that the floor price has never been engaged under the interconnection cap-and-floor scheme, though a cap has, “and energy consumers have been able to share in high revenues.”

Energy regulator Ofgem is expected to make the final decision on successful LDES projects in Summer 2026.

Other changes affecting the energy sector in the Planning and Infrastructure Act 2025 include new powers for the government to provide cash benefits to homes located near new or upgraded transmission infrastructure, a measure introduced in a bid to accelerate grid upgrades. The Act also provides NESO and Ofgem the legal backing to implement ongoing grid connections reform and streamlines the consultation process for nationally significant infrastructure projects.

The law also unlocks forestry land for electricity generation, transmission and storage in England. The UK government expects the change to increase the amount of electricity produced from renewables.