The UK government has a new plan called the “cap and floor” scheme. This plan will help attract more money for building long-duration energy storage (LDES), especially new pumped storage facilities. This could mean the first big LDES projects in the UK in nearly 40 years!
The government said that high costs at the start have kept people from investing in LDES, even though it costs less to run. Earlier this year, they talked to people about how this new plan could encourage more investment.
So, what does the cap and floor scheme mean? It works like this: developers will have a guaranteed minimum income (the floor) but will also have a limit on how much they can earn (the cap). The minimum income is set low so it won’t be used often; it acts like insurance if earnings are lower than expected. In return, developers will have to share some of their profits with consumers if they earn above a certain level.
The Office of Gas and Electricity Markets (Ofgem) will oversee this scheme. The first round of applications is expected to open next year. Ofgem will create the support scheme with two paths—one for established technologies and another for new ideas.
Right now, Great Britain has 2.8 GW of LDES from four pumped storage hydro schemes in Scotland and Wales. The government found that using 20 GW of LDES could save the electricity system about £24 billion between 2025 and 2050. Also, the National Electricity System Operator says the UK will need between 11.5 GW and 15.3 GW of LDES by 2050 to reach net zero emissions.
Several LDES projects are being planned, and some may be ready by 2030. The new support scheme could help these projects move forward.
Drax, a renewable energy company, is happy about this announcement. Drax wants to expand its existing Cruachan pumped storage facility in Scotland by building a new 600 MW plant. This new plant would nearly double the facility’s power output to over 1 GW.
Ian Kinnaird, Drax’s Scottish Assets Director, said, “This announcement is a big step in removing key challenges for developers who want to build new pumped storage hydro plants. I want to thank the new government for acting quickly in their first 100 days in office. We look forward to working together with the UK Government and others to create a clean power system by 2030 that helps our energy security and benefits consumers.”
A similar cap and floor scheme is used for electricity connections between Great Britain and other countries. This scheme started in 2014. So far, no floor payments have been made, but developers have shared some of their extra money with consumers.
