Billpayers could be left to foot an extra GBP 1.6 billion ($2.15 billion) due to a planned cap-and-floor program to support UK long-duration energy storage (LDES) deployment, a campaign led by prominent UK battery storage developers has claimed.
A group of eight battery energy storage system (BESS) developers has argued that while there is “industry-wide consensus” that Britain needs long and short-duration storage, the number of projects being backed in the initial cap and floor round represents poor value to consumers.
Energy regulator Ofgem announced in June 2026 its “minded-to” decision to progress 16 energy storage projects in the first round of the cap-and-floor program, including 11 lithium-ion BESS projects up to durations of 18 hours, as well as three pumped hydro storage projects, one compressed air energy storage projects and one vanadium flow battery. Final awards for the tender process have not been made.
The proposed cap-and-floor program would offer these projects a revenue floor and ceiling over an expected contract period of 25 years. The goal of the program is to provide long-term revenue certainty to stimulate investment in long-duration energy storage projects. It’s a model that has been deployed in Great Britain before to support interconnector buildout.
The Campaign to Deliver Affordable Energy Storage (CDAES) has called for a rethink of how much capacity is procured through LDES cap and floor following publication of a Baringa report commissioned by the group. The consultancy’s report compared the proposed 7.6 GW of capacity to a 4.4 GW fleet scenario set out by Baringa in its central forecast for 2035.
Baringa estimates top-up payments to be around £110 million a year more on average than under its central case, with an additional GBP 1.6 billion in extra consumer costs overall.
The CDAES commissioned analysis claims delivering the full 7.6 GW of LDES capacity included in Ofgem’s minded-to decision would lower investment in short-duration capacity, and could see two-hour BESS revenues fall by 13% based on modelling of short-duration energy storage margins under a 7.6 GW of deployed LDES scenario. Reduced profitability would driver lower investment in battery storage, according to the report.
Baringa did conclude that LDES investment via a government-backed cap-and-floor mechanism would enable the energy transition but added the optimum capacity and timeline for deployment “is not yet clear.”
Ofgem has been approached for comment on the CDAES claims. Speaking with ESS News earlier in 2026, Ofgem’s director of major projects Beatrice Filkin said that operating under Ofgem guidance, grid operator NESO had carried out sensitivity analysis to try and calculate the potential system value that long-duration energy storage projects would deliver. The 7.6 GW of capacity proposed by Ofgem is within the 2.7 GW to 7.7 GW capacity by 2035 range recommended by NESO in 2025.
Filkin also said in July that if a cap-and-floor regime for long-duration energy storage looked like it might be detrimental to consumers, then the energy regulator would push back, and added that it was clear that the short-duration battery market in Great Britain had been delivering a strong pipeline of projects and the regulator was keen not to distort that.
In a CDAES press release, Chris Elder, CEO of Fidra Energy and a spokesperson for the campaign said that while long duration storage will be an important part of the United Kingdom’s future energy system, “underwriting this level of capacity in the first auction risks locking consumers into decades of higher costs.”
“The minded-to decision is based on a highly ambitious decarbonization scenario which we are already falling short of and we urge Ofgem and government to review the final decision carefully,” Elder said.
Mark Simon, CEO of Eelpower Energy added that the analysis commissioned by the campaign group shows long-duration storage can benefit consumers, but those benefits depend on the scale and timing of investment,
“A more gradual approach would allow future investment to respond as the needs of the electricity system become clearer.”
The eight members of CDAES are: Eelpower Energy, Conrad Energy, Revera Energy, Constantine Energy Storage, Zenobe, Voltwise Power, Fidra Energy, and Pulse Clean Energy. The group collectively represents 2 GW of short duration operational capacity, and 5.6 GW of pipeline capacity .
The post BESS developers warn LDES cap and floor could cost billpayers GBP 1.6 billion appeared first on Energy Storage.
