The UK government is moving forward with its commitment to promote investment in long duration energy storage (LDES) technologies by publishing details on its “cap and floor” investment framework. This initiative aims to unlock billions in funding for vital projects, strengthen energy independence, create jobs, and help the UK become a clean energy superpower. The scheme is designed to address barriers that have hindered the development of new storage capacity for nearly 40 years, paving the way for a more resilient and sustainable energy system.
Why Long Duration Energy Storage Matters
Long duration energy storage is crucial for a secure, cost-effective, and low-carbon energy system. LDES technologies can store excess renewable energy generated over extended periods (days, weeks, or even months), replacing the flexibility currently provided by fossil fuel generation and alleviating grid constraints. By storing surplus clean, homegrown energy produced from renewable sources, the UK can boost its energy security, reduce reliance on fossil fuels, and protect households from volatile global gas markets.
Benefits of LDES
- Decarbonization: LDES facilitates the integration of more renewable energy sources into the grid, reducing reliance on fossil fuels and lowering carbon emissions.
- Energy Security: By storing excess renewable energy, LDES ensures a reliable energy supply, even when renewable sources are not readily available.
- Cost Savings: Deploying LDES can lead to significant system-wide cost savings by making cheaper renewable energy available during peak demand, reducing the need for expensive natural gas.
- Grid Flexibility: LDES provides flexibility to the energy system, helping to balance supply and demand and manage grid constraints.
The “Cap and Floor” Scheme: A Detailed Look
The “cap and floor” scheme is a key component of the UK government’s strategy to encourage investment in LDES. This model provides a guaranteed minimum income (“floor”) for developers, ensuring revenue certainty and mitigating the risks associated with high upfront capital costs and long build times. In return, there’s a limit (“cap”) on the revenues that operators can earn, with any excess revenue above the agreed cap returned to consumers.
Key Features of the Scheme
- Revenue Certainty: The “floor” mechanism guarantees a minimum income for LDES developers, making projects more attractive to investors.
- Consumer Protection: The “cap” mechanism limits the revenue that operators can earn, ensuring that consumers benefit from the scheme’s success.
- Technology Support: The scheme supports both established and novel LDES technologies through different application routes.
- Ofgem Oversight: Ofgem, the Great Britain energy regulator, will act as the LDES regulator and investment framework delivery body, leveraging its expertise in implementing similar schemes.
How the Scheme Works
- Investment Support: The scheme provides financial support to LDES projects, reducing the financial risks associated with development and operation.
- Revenue Stabilization: The “cap and floor” mechanism stabilizes revenues for LDES operators, ensuring a predictable income stream.
- Consumer Benefits: Excess revenues above the “cap” are returned to consumers, reducing energy bills and promoting affordability.
- Private Investment: By de-risking LDES projects, the scheme encourages private investment in the sector, driving innovation and growth.
Technologies Supported by the Framework
The “cap and floor” scheme is expected to support a range of LDES technologies, including:
- Pumped Storage Hydro: This established technology stores electricity by pumping water to a higher reservoir and releasing it when needed.
- Liquid Air Energy Storage: This technology stores energy by cooling air to a liquid state and releasing it to drive a turbine when electricity is needed.
- Compressed Air Energy Storage: This technology stores energy by compressing air and releasing it to drive a turbine when electricity is needed.
- Flow Batteries: These batteries store energy in liquid electrolytes, offering long discharge durations and scalability.
UK’s Ambitions and Targets for Energy Storage
The UK government has set ambitious targets for energy storage deployment, recognizing its importance in achieving a clean and reliable energy system.
- 11.5 to 15.3 GW of LDES by 2050: The National Electricity System Operator estimates that this capacity will be required to achieve net zero emissions.
- 23-27 GW of battery capacity and 4-6 GW of long-duration energy storage by 2030: As outlined in the Clean Power 2030 Action Plan.
- 20 GW of LDES by 2050: Government analysis suggests that this level of deployment could save the electricity system £24 billion between 2025 and 2050.
- COP29 Pledge: The UK has committed to a collective goal of deploying 1,500 GW of energy storage globally by 2030 as part of the ‘COP29 global energy storage and grids pledge’.
Industry Reaction and Future Outlook
The “cap and floor” investment framework has been welcomed by renewables associations and LDES project developers. The scheme is seen as a crucial step in unlocking private investment, enabling construction to begin on ready-to-go projects, and delivering the flexible, homegrown energy the UK needs in its transition to net zero.
With the implementation of the “cap and floor” scheme and other supportive policies, the UK is poised to become a leader in LDES deployment, driving innovation, creating jobs, and building a more resilient and sustainable energy future.
