The Department for Energy Security and Net Zero (DESNZ) provided its response to a consultation on Long Duration Electricity Storage (LDES) on 10 October 2024. The consultation was originally published on 9 January 2024 and covered policy objectives, scale, scope and design parameters for a cap and floor scheme and means of delivery. The Government has now outlined its responses to the questions it put to stakeholders.
Cap and floor scheme
DESNZ has confirmed that it intends to create a cap and floor scheme (based on the Contracts for Difference scheme) in order to incentivise investment in LDES's which currently require large upfront expenditure. The assessment will be based on gross margin for calculation but further details on calculating methodology will be considered and outlined in a winter update.
Application routes
As part of the scheme, there will be two routes through which LDES users can apply:
- for established technologies (minimum capacity 100MW, 6-hour duration); and
- for more novel technologies (minimum capacity 50MW, 6-hour duration).
Examples of established technologies given are Pump Storage Hydro (PSH) with Liquid Air Energy Storage (LAES), Compressed Air Energy Storage (CAES), gravitational, high-density pumped hydro, and flow batteries listed as examples of more novel technologies. While at the moment an LDES will be defined as 6 hours of duration or more, DESNZ will undertake further modelling to determine the most appropriate duration given a slight majority of respondents disagreed with using that duration figure.
Other clarifications
DESNZ has outlined other details on how the scheme will work:
- Applications will be assessed holistically. In other words, the entire context of the project will be taken into account rather than a specific set of criteria, for example on price.
- Ofgem has been selected to deliver the cap and floor scheme, based on its experience of using licence arrangements to regulate support for investments (with interconnectors cited as an example), the relative speed with which it could be implemented as the scheme deliverer through the Energy Act 2023 as well as the respondents' overall support for Ofgem.
- The length of agreements under the scheme would be up to first refurbishment (as described in the consultation) or 25 years in line with arrangements with interconnectors.
- Participants in the cap and floor scheme will also be able to take part in the Capacity Market but will not be able to receive support if they can already readily deploy via other existing market opportunities.
Next steps
DESNZ they will be assessed, as well as other points, in the winter update. DESNZ will work with Ofgem with the aim to open the scheme in 2025.
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