Great Britain’s LDES cap and floor: winning an award does not fix what the floor is worth

A first-window award under Great Britain’s cap and floor for long duration electricity storage will not settle what a project’s floor is worth. Under the scheme, an approved project is paid when its assessed revenue falls below a set amount, in circumstances Ofgem sets, and pays back when it rises above one. Ofgem calls the floor a safeguard against downside risk rather than a target or a guaranteed return, and only a project that meets its Minimum Availability Target can draw on it. The floor’s default rate is set only at the project’s own final investment decision. The availability target was still a proposal in Ofgem’s call for input of 21 July 2026, and Ofgem expects to take its final decisions on such proposals shortly after the awards. And in its June consultation, Ofgem says the awards themselves will be conditional on meeting delivery requirements, with support it may withdraw where they are not met.^{1, 2, 3, 4}

Ofgem moved the floor rate from the window’s opening to the investment decision to reduce financing risk and support timely delivery: it is the yield of a sterling BBB bond index averaged over the 20 trading days before that decision, and the cap’s financial inputs follow the same date. The bids were assessed on indicative figures based on 8 April 2025; the rates in Ofgem’s documents, 4.47% at the floor and 7.48% at the cap in real terms, are indicative.^{1, 4} That spares a project a rate fixed at the window’s opening, but it also means the level of its floor is known only at its investment decision, after the award.

The availability target is set project by project and excludes planned outages and force majeure; in its July call for input, Ofgem is minded to lower the value proposed for pumped storage hydro from 95% to 92.5%.^{1, 3}

Ofgem’s provisional list of 26 June 2026, its minded-to decisions for window 1 and not final awards, has 16 projects with 7,645 MW, chosen from the 73 projects assessed after four of the 77 eligible withdrew. As of 22 October 2026, Ofgem’s page for the consultation on that list shows it as “Closed (awaiting decision)”, and Ofgem still says it expects “to publish a final decision later in Autumn 2026, confirming which projects will be awarded a cap and floor regime”.^{4, 7, 8, 9}

Those requirements, in the same consultation, are continued progress, ongoing viability and possibly time-bound milestones. Under the consultation, Ofgem may withdraw support where they are not met, and the requirements it intends to publish with the final awards would allow it to revoke the agreements of projects not making sufficient progress. It set the list’s capacity at the upper end of NESO’s advised range to allow for projects that drop out, and did not exclude projects on deliverability alone where a credible pathway remained open, intending to manage that risk through conditions.⁴ On the consultation’s terms, even a final award is a position a project keeps only by continuing to make sufficient progress.

One term is fixed by the project’s own submission: window 1 projects submitted costs in three scenarios, P10, P50 and P90, and the P90 estimate is the Project Cost Ceiling. Well-evidenced overruns up to it enter the regulatory asset value unless demonstrably inefficient or wasteful; overruns above it are treated as inefficient by default, unless the project shows they could not have been predicted, reduced or avoided.^{1, 10} In effect, a project’s own P90 estimate is the most it can expect to recover.

Projects must be delivered by 2030 or 2033, depending on their track, extendable for force majeure to backstop dates of 31 December 2032 and 31 December 2035. A project that misses its date without a recognised delay event or force majeure, or misses its backstop date, repays part of its future floor payments in proportion to the delay. The scale of that repayment rests on a backstop delay factor, still a proposal in Ofgem’s call for input of 21 July 2026, which sets it at 0.05 for each three months of delay, or part of three months, up to 1.0.^{1, 3} Late delivery is paid for out of the floor, the protection the scheme exists to give.

Nor does an award come with a way out or early money: Ofgem’s application guidance does not expect a first-window project to have an option to opt out of the cap and floor licence conditions and operate as a merchant plant, and covers development spending under the regime for successful projects only, with no plans for advance development funding.¹¹

Source: Ofgem’s decisions, frameworks and guidance for window 1 (decided terms), its minded-to consultation (indicative rates, the conditions on the awards) and its licence call for input (proposals, and when Ofgem expects to decide them).^{1, 3, 4, 5, 10, 11}

Floor payments run through the Balancing Services Use of System charge: NESO collects it from electricity suppliers, pays floor support to projects and reclaims revenue above the cap for consumers. In Ofgem’s assessment of impacts, as of 26 June 2026, the floor exposure of the provisional list is around GBP 87 million a year in the central case and around GBP 171 million in a low-revenue case, about GBP 1 and GBP 2 per domestic consumer a year. Ofgem’s central view for the provisional list is no material net direct impact on consumer bills.^{1, 12} Because Ofgem’s central case already has the listed projects drawing on the floor, around GBP 87 million a year across the portfolio, we judge the proposed availability target to bear on some projects’ expected revenue, not only on their downside.

Ofgem sets the cap and floor rates of return itself; the only terms projects compete on are regime duration and residual value, cut from the five parameters Ofgem consulted on for its financial framework. The default, decided in that framework after consultation, is a 25-year regime with zero residual value; a project may ask for a shorter regime, of at least 20 years, or a longer one, with evidence. With zero residual value, the regime assumes a project recovers all its capital investment over its term. A project may bid a non-zero residual value if its life outlasts the regime or to help lower the floor level, provided delivery does not suffer, and may propose a longer regime for a longer-lived asset, also to help lower the floor; Ofgem says recognising residual value can lower the floor price and make consumer-funded payments less likely.^{1, 5}

In its provisional decisions, Ofgem is minded to refuse every request for a higher floor or a longer regime: the two regime variation requests, which sought a higher, inflation-linked floor, the one request for a longer regime and the two that combined a longer regime with a residual value. It is minded to accept 41 of the 45 requests for a residual value alone; most, it says, showed a value credible beyond the regime or one that reduced the floor, and the four it would reject tied residual value to negative decommissioning costs.⁴ With every request to vary or lengthen the regime set to be refused, residual value was the only lever left, and it is one that can lower a project’s own floor.

The outcome of those requests set the inputs to Ofgem’s Financial Assessment, which compares each project’s projected revenues with its floor level; the Economic Assessment ranked the projects as the starting baseline, and the Financial and Strategic Assessments were overlaid to decide whether to adjust that ranking. Ofgem takes the three assessments “in-the-round”, with no weightings set between them.^{4, 10} A residual value bid changes one input to one of those assessments; on its own, it does not decide selection.

The Electricity Act 1989, as amended by the Planning and Infrastructure Act 2025, sets the threshold for any window: a long duration installation has a generating capacity of at least 50 MW and can generate at full capacity for at least eight hours in a row, and regulations may change the thresholds but not set the period below eight hours. Window 1 asked for at least 100 MW for stream 1 (technology readiness level 9) or 50 MW for stream 2 (level 8), discharging at full power for at least 8 hours and keeping that capacity and duration over the full regime of 25 years, among seven pass/fail criteria that a project had to pass in full. Projects that can be deployed without support, including any that have taken a final investment decision, are not supported.^{2, 5, 6, 13, 14}

Of 171 applications made between 8 April and 9 June 2025, Ofgem found 77 eligible on 23 September 2025.¹⁴

Source: Ofgem’s eligibility outcome, Tables 1 and 3 (a technology missing from Table 3 had no eligible project); Ofgem’s minded-to consultation, Table 1.^{4, 14}

On the provisional list, pumped storage hydro holds 3,900 of the 7,645 MW, in 3 projects of 15 to 32 hours: 51.0% by our calculation, against 48.3% for batteries of all kinds. By our count from Ofgem’s tables, three of the 11 lithium-ion batteries on the provisional list are rated at 8 to 8.7 hours and eight at 11.1 to 18.03 hours, and none of the ten lithium-ion projects of 1,000 MW or more that Ofgem assessed (nine at 8 hours, one of 1,800 MW at 8.7 hours) is on the list. Ofgem says the provisional portfolio has “a strong representation of higher-duration assets”.⁴ Eight hours was the minimum to qualify, not what won a place: the provisional list leans well above it, though on Ofgem’s account no single measure decided it.

What capacity markets and flexibility services pay for, by comparison, is covered in the capacity and flexibility guide.

For projects left off the list, or not ready for the first window, Ofgem’s June consultation said it intends to consult in 2026 on the design of future windows, aiming to confirm by 2027 its intent to open a second window; there will be no automatic route into a future window, but projects unsuccessful in window 1 will not be excluded.⁴

On the timetable in Ofgem’s call for input of 21 July 2026, final decisions on the licence conditions are expected shortly after the awards, a statutory consultation on the licence modifications in the first quarter of 2027 and final decisions on them in the second quarter of 2027; only then do the modified generation licences come into effect.³

ListingMinds, “Great Britain’s LDES cap and floor: winning an award does not fix what the floor is worth”, 13 October 2026, updated 22 October 2026. https://www.listingminds.com/energy/field-notes/ldes-cap-and-floor-great-britain