Bespoke support for LDES could create market distortion, Energy UK warns

Providing bespoke support for long duration electricity storage (LDES) could distort the market, Energy UK has warned.

The industry trade body was responding to the government’s latest consultation on developing a cap and floor scheme that aims to overcome barriers to LDES, such as a lack of revenue certainty, high upfront capital costs and long build times.

While it describes support to get LDES off the ground as “essential”, some of the trade body’s members have concerns that the support could impact unsupported projects in shorter-duration markets.

It said: “Any bespoke support can create market distortion but as with support for CCUS, hydrogen to power, hydrogen storage and nuclear, we support this as necessary to get the building blocks of the transition in place.

“Some members here highlight this brings LDES technology in line with other technologies that already have bespoke funding arrangements and note that the design of the cap and floor (specifically how the cap and the floor are set) will incentivise projects to compete in other markets as they (normally) would without the support. Other members, however, have concerns that the support could impact unsupported projects in shorter-duration markets.

“Members agree that this needs to be carefully monitored along with further work on how a level playing field could be created for technologies to compete against each other going forward.”

LDES is described by the government as “pivotal” in delivering a smart and flexible energy system, capable of integrating high volumes of low carbon power, heat, and transport.

According to the Department for Energy Security and Net Zero, deploying up to 20GW of LDES is estimated to result in system savings of up to £24 billion, representing a saving to consumers of 3.3% of the total system costs.

Commenting on the issue further Naomi Baker, senior policy manager at Energy UK, told Utility Week: “We welcome the government’s recent proposals to support private sector investment into long-duration energy storage.

“These will enable higher volumes of low-cost renewable energy to be integrated onto the grid to both bring down bills and support future energy security even when the sun doesn’t shine or the wind doesn’t blow.

“Today 3GW of this storage comes from four pumped hydro plants built over 40 years ago. Ensuring that sufficient new capacity is online in time to help balance the 50GW of offshore wind in the next decade means we have to act quickly.”