Designing a Policy Mechanism for Long-Duration Energy Storage: The British Experience

The UK parliament recently introduced a cap-and-floor mechanism for net revenues of Long-Duration Energy Storage in Great Britain (GB). The article summarizes learnings from the UK proceedings around four questions: (a) What drives the need for LDES? (b) What are the barriers to LDES deployment in GB? (c) Which options could mitigate these barriers? (d) What are the key design choices for the cap-and-floor mechanism?

GB evidence indicates that (1) energy shifting over long timeframes and security-of-supply benefits drive LDES needs; (2) revenue uncertainty is the primary barrier; and (3) a cap-and-floor mechanism could mitigate investment risk.

Evidence on LDES needs is extensive, whereas analysis of barriers, their impact on investment, and the effects of alternative policies and cap-and-floor designs remains limited. Further research could address this gap and contribute insights into the interplay of long-term contracts and short-term markets in hybrid electricity markets for deeply decarbonized power systems.