Ofgem Funds 16 Long-Duration Energy Storage Projects

The UK energy regulator Ofgem announced on 26 June 2026 the selection of sixteen projects for its long-duration energy storage (LDES) competition. The decision unlocks over 2 billion GBP in total financial support under the government’s Net Zero Innovation Portfolio. The scheme targets technologies capable of storing energy for durations exceeding six hours, a critical gap in the UK's strategy to manage intermittent renewable power generation. The funding round represents the single largest public commitment to LDES technology in the UK to date.

Context — why this matters now

The last major UK energy storage initiative was the 2023 Contracts for Difference (CfD) auction which allocated 1.5 billion GBP primarily for shorter-duration lithium-ion battery projects. The UK grid currently operates with a wind and solar penetration rate exceeding 45% during peak generation periods. This high penetration creates significant volatility, with daily power price spreads frequently exceeding 200 GBP per MWh. The government’s 2035 net-zero grid target requires firming capacity estimated at 30-50 GW, a scale that short-duration batteries cannot address economically. Ofgem's move directly targets this capacity deficit before it becomes a binding constraint on further renewable deployment.

Data — what the numbers show

The sixteen selected projects have a combined proposed capacity of 3.8 gigawatts (GW). This capacity is expected to deliver over 35 gigawatt-hours (GWh) of storage. The average grant per project exceeds 125 million GBP, with a range from 45 million GBP to a maximum of 280 million GBP for the largest scheme. The technologies include compressed air energy storage (CAES), liquid air energy storage (LAES), and flow batteries. For comparison, the current UK battery storage operational fleet totals approximately 5.2 GW but provides less than 4 GWh of energy, highlighting the long-duration focus. The UK's ten-year government bond yield traded at 3.82% on the announcement date, influencing the cost of capital for these infrastructure projects.

Metric	Before Scheme (UK LDES Landscape)	After Scheme (Projected)
Operational LDES Capacity	< 0.5 GW	~4.3 GW (upon completion)
Longest Commercial Duration	~4 hours (pumped hydro)	8-24+ hours
Public Capital Committed	~400 million GBP (pre-2026)	>2.4 billion GBP

Analysis — what it means for markets / sectors / tickers

Direct beneficiaries include UK-listed engineering and construction firms like Siemens Energy (ENR) and Balfour Beatty (BBY), poised for major contract awards. Pure-play storage developers, such as Highview Power (private), see their technology pathway validated, potentially attracting secondary equity funding. The scheme pressures traditional peaking gas plant operators like Drax (DRX) and SSE (SSE), as LDES competes directly for capacity market payments. A key risk is technology scaling; several selected solutions like LAES remain unproven at multi-gundred-megawatt scales, risking delays. Investment flow is shifting from speculative short-duration battery parks to government-backed, long-duration infrastructure, with pension and sovereign wealth funds showing increased interest in the asset class.

Outlook — what to watch next

The next catalyst is the final investment decision (FID) for the first three projects, expected by Q4 2027. The July 2027 Capacity Market auction will test the impact of LDES on clearing prices for winter 2030/31 delivery. Monitor the 10-year UK gilt yield; a sustained move above 4.25% could jeopardize project economics that rely on low-cost debt. Watch for similar policy announcements from the German Federal Network Agency (BNetzA) and the EU’s Innovation Fund, which could create a continental investment wave. The performance of the first CAES facility during the winter 2028/29 demand peak will set a benchmark for the entire sector's credibility.

Frequently Asked Questions

What is long-duration energy storage and why is it important?

Long-duration energy storage (LDES) refers to systems that can store electrical energy for six hours or more, often for multiple days or weeks. It is crucial for grids with high renewable penetration because wind and solar generation is intermittent and does not always match demand patterns. Short-duration batteries discharge within hours, but LDES can bridge multi-day weather events with low wind or sun, providing grid stability without fossil fuel backup.

Which specific companies are building these 16 projects?

While Ofgem has not released a full public list, announced participants include established players like Highview Power for its liquid air storage technology and RheEnergise for its high-density hydro systems. Major utilities such as EDF and SSE are also consortium leads on several projects, leveraging their existing grid connections and development expertise to deploy novel storage solutions at scale.

How does this funding compare to support for renewable generation like wind and solar?

The 2+ billion GBP LDES commitment is substantial but still smaller than annual renewable subsidies. The Contracts for Difference (CfD) scheme allocated over 3.5 billion GBP in its 2025 round alone for offshore wind and solar projects. The LDES funding is a complementary infrastructure investment, recognizing that building generation is no longer the primary bottleneck; managing its output is now the critical challenge for a net-zero grid.

Bottom Line

Ofgem's massive capital commitment marks a strategic pivot from funding renewable generation to securing the firm capacity required to use it.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.