LDES Response

The Energy Storage Association (ESA) has submitted a response to Ofgem’s Call for Input on the proposed Special Licence Conditions for the Long Duration Energy Storage (LDES) Cap and Floor scheme. The response draws on input from ESA’s active and growing LDES Working Group and reflects the views of developers, investors, suppliers and wider stakeholders across the sector.

What is Long Duration Energy Storage (LDES) and how much does the UK need?

Long Duration Energy Storage (LDES) is generally defined as an energy storage facility capable of importing and storing electricity and subsequently re‑exporting it at full capacity for eight hours or more. For example, a project with a 100MW export capacity would typically qualify as LDES if it had at least 800MWh of storage capacity. The definition also encompasses much longer‑duration technologies capable of storing energy for days, weeks or even months.

The primary role of LDES is to capture excess renewable electricity generated during periods of high wind and solar output and make it available when generation is low. At present, a significant proportion of this renewable energy is curtailed, or switched off, at considerable cost to consumers. In 2025 alone, more than 10TWh of renewable generation is estimated to have been curtailed, costing consumers between £1.4 billion and £1.8 billion.

Under the Government’s Clean Power 2030 Action Plan, renewable generation capacity is expected to more than double, from 46GW in 2024 to over 115GW by 2030. Without parallel investment in system flexibility, including LDES, curtailment levels are expected to rise materially.

The UK currently has just under 3GW of LDES capacity, primarily from pumped storage hydro assets constructed decades ago. Clean Power 2030 identifies the need for an additional 1–3GW of LDES by 2030, with requirements forecast by NESO to grow to as much as 10.5GW by 2035 and 16.5GW by 2050.Beyond reducing curtailment, LDES delivers wider benefits to consumers and the energy system by reducing reliance on expensive, carbon‑intensive gas‑fired generation and, where strategically located, helping to defer or avoid costly and disruptive grid reinforcement.

What is the LDES Cap and Floor scheme?

LDES assets are capital‑intensive, long‑lived infrastructure projects with extended development and construction timelines. At the same time, evolving electricity markets make revenues difficult to forecast over the lifetime of a project. Together, these factors have created a significant barrier to investment.

In recognition of this challenge, the UK Government announced in 2024 that it would introduce a Cap and Floor regime for LDES. The scheme provides developers with a guaranteed minimum revenue (the floor) sufficient to recover efficient costs, while also capping upside revenues to deliver a reasonable but not excessive return. Ofgem has been tasked with designing and implementing the regime, drawing on its experience of a similar framework for electricity interconnectors.

Ofgem opened the first LDES Cap and Floor application window in April 2025, targeting projects deliverable by 2030 (Track 1) and 2033 (Track 2). Of the 171 projects that applied, 77 passed the initial eligibility stage. Following detailed assessment, Ofgem is expected to publish an initial shortlist of projects by the end of May 2026, with final licence awards due before the end of August 2026.

In parallel, Ofgem is continuing to develop the Special Licence Conditions that will govern how the regime operates in practice. Feedback from the Call for Input will inform further refinement ahead of a full statutory consultation planned for Q2 2026.

The ESA’s response to the Call for Input

In its submission, the ESA made a number of proposals aimed at improving clarity, investability and delivery certainty, including that:

• Post‑regime arrangements should be time‑limited, providing developers with greater certainty over the duration of trailing obligations.
• Post‑construction adjustments to cap and floor levels should be completed more quickly than currently proposed, enabling earlier alignment with actual project costs.
• Procurement rules should ensure developers honour any local content commitments made during the application process.
• Transmission, network and other policy charges should be treated as fully pass‑through, non‑controllable costs.

The ESA also highlighted the need for greater clarity around:

• The treatment of different cost categories across development, operation and decommissioning.
• The circumstances under which costs may be excluded from cap and floor calculations or assessed revenue determinations.
• The mechanisms for resolving disputes between Ofgem and licensees in a timely and fair manner.

Ensuring predictable financial outcomes for lenders, investors and developers to support bankability.

The response further noted that the Special Licence Conditions should remain technology‑agnostic and ensure that co‑located, behind‑the‑meter and hybrid configurations are neither advantaged nor disadvantaged relative to standalone, front‑of‑meter projects. The ESA also emphasised the importance of Ofgem publishing Regulatory Instructions and Guidance (RIGs) alongside the statutory consultation, given their significant impact on financial outcomes.

Supporting effective delivery of LDES in the UK

The ESA reiterated its strong support for the Cap and Floor regime and stressed that its success will ultimately be measured by projects reaching final investment decision, achieving financial close and progressing into construction.

The response underlined the need for clear and consistent demand signals from Government, NESO and Ofgem beyond Window 1, including transparency on capacity volumes, locational needs and future policy direction. It also highlighted the value of maintaining technology diversity within the LDES pipeline to maximise supply‑chain participation and wider UK economic benefits.

Finally, the ESA noted that closer coordination between future Cap and Floor windows and renewable generation allocation rounds could deliver better outcomes for consumers by reducing curtailment, limiting reliance on gas‑fired generation and avoiding unnecessary grid reinforcement.

The ESA will continue working closely with Ofgem and stakeholders as the regime is finalised.