Ofgem will guarantee revenue for massive battery projects that store electricity for 18 hours or more. The Long Duration Electricity Storage (LDES) cap-and-floor scheme, announced on 14 February 2025, backs 3.5 GW of new storage capacity, enough to power 2.5 million homes for a winter evening. The regulator says this will cut reliance on gas peaker plants and lower system costs by up to £1bn annually by 2040.
As Energy-Storage.News reports, the first window of the scheme attracted bids from lithium-ion, flow battery and compressed-air projects. The winners include an 18-hour lithium-ion system, a technology that can discharge at full power for 18 consecutive hours before needing recharge.
How the cap-and-floor works
The scheme guarantees a minimum revenue floor for developers, typically £30–£40 per MWh, and caps their maximum earnings at around £80–£100 per MWh. If market prices fall below the floor, Ofgem pays the difference from a levy on electricity suppliers. If prices exceed the cap, developers repay the surplus to the scheme.
This reduces investment risk for banks. That makes it cheaper to finance large storage projects. The catch: the levy will be added to household bills via network charges. Ofgem estimates the initial impact at £5–£10 per year for a typical 3-bed semi using 3,500 kWh of electricity annually. By 2040, the net effect should be negative, meaning bills fall by £15–£20 as cheaper storage displaces expensive gas.
Why 18-hour lithium-ion matters for your bill
Most UK battery storage today is 1–2 hour duration, used for frequency response and short-term balancing. Longer-duration storage can shift cheap renewable power from windy nights to peak demand periods, the 4–7pm winter weekday when gas plants currently set the price.
If 18-hour lithium-ion works at scale, it could reduce the number of hours when gas sets the wholesale price by up to 30%, according to modelling by the Department for Energy Security and Net Zero. That translates to lower wholesale costs, which make up about 40% of the average household bill. But lithium-ion batteries degrade faster than alternatives such as flow batteries or compressed air, losing around 2–3% capacity per year, meaning they may need replacement after 10–15 years, adding to lifecycle costs.
What this means for homeowners now
Households should not expect immediate bill reductions. The first projects under window 1 will not be operational until 2028 at the earliest. The scheme’s levy will appear on bills from 2026 as a small line item under network charges, look for “LDES” or “storage” in your supplier’s annual statement.
For those considering home solar-plus-battery, the LDES scheme is a positive signal: it indicates that the grid will increasingly rely on storage to manage renewables, making self-generation more valuable. The Energy Saving Trust notes that a typical 4 kW solar system with 5 kWh battery can cut electricity bills by 60–70%, with payback periods of 8–12 years under current tariffs. The LDES scheme does not change home battery economics directly, but it reinforces the direction of travel: more renewables, more storage, and eventually lower wholesale prices.
Households on standard variable tariffs should check their supplier’s network charge breakdown from April 2026. Those with electric vehicles or heat pumps, which increase electricity consumption, will see a slightly larger absolute impact from the levy, though the net effect should still be positive by the early 2030s.
Frequently Asked Questions
Yes, slightly. Ofgem estimates an initial levy of £5–£10 per year for a typical 3-bed semi from 2026, added via network charges. The net effect should become negative by the early 2030s as cheaper storage reduces wholesale costs.
Not directly. The LDES scheme targets utility-scale storage. However, it signals stronger grid investment in renewables and storage, which supports the case for home solar-plus-battery. Payback periods remain 8–12 years under current tariffs, according to the Energy Saving Trust.
