The UK Government has selected a cap and floor regime as its preferred investment framework for large-scale, long-duration electricity storage projects.
Earlier today, the Department for Energy Security and Net Zero (DESNZ) published its consultation into Long Duration Electricity Storage, setting out its intention to develop a cap and floor mechanism to unlock private investment in new projects to strengthen and stabilise Britain’s electricity grid.
The publication stated “that developing a cap and floor mechanism similar to that for interconnectors is the most appropriate policy to meet our public commitment to enable investment by the end of 2024.”
DESNZ said that a cap and floor regime “would provide revenue certainty for investors by providing a guaranteed revenue should returns from operating assets drop below the agreed floor.
“This also offers protection to consumers by providing a cap on the revenue that operators can earn, with some or all of the revenue earned over the agreed cap returned to the consumer.”
The selection of a cap and floor mechanism as the Government’s preference has been welcomed by Drax, which is progressing plans to expand its existing Cruachan pumped storage facility in Scotland through the construction of a new 600MW plant.
Ian Kinnaird, Drax’s Scottish Assets Director, said: “This is a big step towards making a new generation of pumped storage hydro plants a reality.
“These new plants would enhance UK national energy security and play a significant role in the fight against climate change.”