Ofgem super-charging clean power storage for first time in 40 years

A new era for renewable power and energy security begins today (Tuesday 8 April) as Ofgem launches a new cap and floor investment support scheme, unlocking billions in funding to build major Long Duration Electricity Storage projects for the first time in 40 years. 

Long Duration Electricity Storage (LDES) 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. 

LDES includes different ways to store electricity for a long time. One method is pumped storage hydro, where water is pumped up to a mountain reservoir using cheap renewable electricity and released later to generate electricity when demand is high and other generation sources are more expensive. 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. 

Large scale storage provides the grid with both security and flexibility to dispatch electricity to manage seasonable peaks or low renewable output over a period of time. This is why the Government, advised by National Energy Systems Operator (NESO), has identified the expansion of LDES as crucial to its ambition to achieve clean power by 2030 and the drive to reach net zero by 2050.  

But no new LDES infrastructure has been built in Britain for 40 years as barriers including high upfront costs have held back investment.  

Ofgem's new ‘cap and floor' scheme will break down this blocker, boosting investor confidence with the security of providing minimum revenue for LDES operators to manage high start-up costs and long build times. 

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. 

This builds on Ofgem's successful electricity interconnector cap and floor model which has been successful in both attracting investment and in protecting consumers, delivering £200m back to customers through reduced bills since its launch in 2014. 

Akshay Kaul, Director General, Infrastructure, for Ofgem said:  

“Renewable energy is the key to securing Britain's energy independence and driving down customer bills in the long term – so it's vital that none of this precious resource goes to waste. 

“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-fuelled power as backup when the weather changes. 

“For decades hydro power has played an important role in our energy system and we expect it and a range of other storage technologies to make an even greater contribution to grid stability, with more projects ready to bid to play their part in this unprecedented investment in energy storage. 

“We have not built any new LDES in 40 years but today we are reversing that legacy by unlocking investment in this important technology to help build a clean, secure energy system for the future.”  

Energy Minister Michael Shanks said: 

“Storing renewable electricity is the key to unlocking a clean power system, but it's been over four decades since a major long duration storage project was built in Britain.  

“As part of our Plan for Change to get Britain building again, we are changing that legacy, by launching a new scheme to unleash investment in electricity storage projects across Britain and create a back-up renewable power system.   

“This will benefit billpayers and reduce our reliance on dictator-driven fossil fuel markets, as well as creating jobs across the country.”  

NESO, in its Future Energy Scenarios report, has advised the Government to add an indicative range of 2.7 to 7.7 gigawatts of stored power by 2035. This addition would at least double Great Britain's current strategic reserve of 2.8 gigawatts spread across four pumped storage hydro schemes in Scotland and Wales.  

Producing one gigawatt constantly for a year is enough to power 2.65 million homes. 

Government analysis has found that 20GW of LDES, the current target set for 2050, could save the electricity system £24 billion between 2030 and 2050, cutting household energy bills as additional cheap renewable energy reduces reliance on more expensive natural gas. 

In October 2024, the government gave the green light for the next generation of LDES assets by deciding to introduce the investment support scheme to be delivered by Ofgem, which has been welcomed by industry today. 

Kate Gilmartin, CEO of the British Hydropower Association, said: 

“This is a historic moment for the UK's energy system. We've not built a new Pumped Storage Hydropower (PSH) facility in nearly 50 years, but with over 10GW and 200GWh of shovel-ready projects, the Hydropower sector stands ready to deliver. 

“PSH is a proven technology that will deliver for at least 80 years, will strengthen grid stability, reduce curtailment, support system resilience and enable the transition to Net Zero. 

“These infrastructure projects bring substantial economic benefits, supporting thousands of skilled jobs, bringing economic benefits across communities and securing investment in domestic supply chains. This marks the beginning of a new era for clean, reliable and secure energy storage in the UK.” 

David Boyer, Director Electricity System, Energy Networks Association (ENA), which represents the UK's energy network operators, said:  

“This scheme is a step towards realising the long-term vision for achieving the government's decarbonisation and energy security ambitions. The electricity networks have been working closely with Ofgem and government to reform the connections queue and secure the long-term investment needed to achieve clean, secure power and protect consumers from future energy shocks." 

Developers of LDES will now need to work with the communities hosting their projects to get the necessary permits and consents in place before they can progress the projects.  

The launch of the LDES scheme follows other proactive steps by Ofgem and government to pick up the pace on delivering flexible clean energy as part of the drive to net zero. This includes grid connection reform to fast-track shovel-ready clean energy projects and the creation of five major new undersea energy links, or interconnectors, to further harness the vast potential of North Sea wind to help power millions of homes. 

Notes to editors

Long-Duration Electricity Storage (LDES) refers to energy storage systems that can store and release electricity for long periods, typically eight hours or more. These systems help balance the supply and demand of electricity, especially when using renewable energy sources like wind and solar, which can be unpredictable.  

Long-duration electricity storage has multiple benefits: 

• It allows a greater amount of cheap renewable power to be integrated into the electricity system, lowering the overall cost of electricity for consumers.  

• Provides power capacity that can be switched on and off, making the grid more flexible. 

• It avoids the waste when, as often occurs today, renewables have to be curtailed due to excess supply or congestion on the grid. 

• And it provides electricity system services to the grid, such as the ability to restart after power failures. 

• If the UK establishes a strong domestic energy storage industry, it can export storage capacity and technologies.  

• Storage would reduce the UK's dependence on costly, polluting and uncertain fossil fuel imports. 

Great Britain currently has 2.8 gigawatts (GW) of LDES across four Pumped Storage Hydro (PSH) facilities in Scotland and Wales. These operate like natural batteries, with electricity stored by pumping water up a mountain to be released when required and are already crucial to the electricity system. Other forms of LDES – such as liquid air energy storage (LAES), compressed air energy storage (CAES) and flow batteries – are also being developed.   

In October 2024, the government decided to introduce an LDES investment support scheme that will be delivered by Ofgem. The cap and floor investment support scheme was strongly supported by the consultation responses and is modelled upon the approach already used to successfully deliver electricity interconnection.   

Government have been working closely with Ofgem to deliver the Technical Decision Document, which sets out details on key decisions for the regime, including, eligibility, application windows, assessment process and the cap and floor thresholds.  

Now the first application window is open, Ofgem expects the first batch of projects under the cap and floor scheme to be agreed in Q2 2026.   

Window 1 of the regime will be open to applications through two “tracks” which will be considered in parallel: a 2030 track and a 2033 delivery track. Ofgem will prioritise decisions on projects that can deliver by 2030 if necessary.  

The indicative capacity range for the first application window is between 2.7 and 7.7 GW. This is based on advice provided by NESO to government, which sets out the amount of LDES capacity needed on the system to deliver the NESO Future Energy Scenarios and Clean Power Pathways  

Long-Duration Electricity  Storage (LDES) refers to energy storage systems that can store and release electricity for long periods, typically eight hours or more. These systems help balance the supply and demand of electricity, especially when using renewable energy sources like wind and solar, which can be unpredictable.  

Cap and Floor is a regulatory scheme to be used to support these projects.  

• Cap: This is the maximum revenue a project can earn. If the project's revenue exceeds this cap, the additional revenue will be shared with consumers. 
• Floor: This is the minimum revenue provided to the project. If the project's revenue falls below this floor, consumers pay the LDES operator the difference up to the floor level.  

Being awarded a cap and floor means the project has financial protection on the downside. It ensures that the project can earn a minimum income to recover their investment. If revenue is high, consumers are protected with the excess revenue being shared with consumers.