The Energy Transition | Ofgem progresses with LDES Scheme

This week, we look at the progress on Ofgem's long term duration storage scheme, NESO's consultation on the transitional Regional Energy Strategic Plan, LCCC advancements for industrial carbon capture contracts and Ofgem's funding of critical climate change projects.

Li-ion BESS dominates window one of the LDES support scheme

Ofgem has announced the 77 projects eligible to enter the next phase under Window 1 of the long term duration storage cap and floor scheme (LDES Cap and Floor Scheme). As previously reported, Ofgem’s LDES Cap and Floor scheme is a financial mechanism used to attract and support investment in long-term energy storage technologies perceived to be crucial for delivering innovative storage solutions.

The 77 eligible projects together have a discharge capacity of 28.7GW ("Track 1" projects aggregate 24.5GW, deliverable by 2030, and "Track 2" projects aggregate 4.2GW, deliverable by 2033) and represent technologies including "li-ion BESS, pumped storage hydro, compressed air energy storage, vanadium flow BESS, and liquid air energy storage (LAES) & BESS hybrid".

It is at this next project assessment (PA) stage that the 77 projects will be assessed against the Multi-Criteria Assessment (MCA) Framework, based on "economic, strategic and financial merits". Ofgem consulted on the framework over the summer, with results showing broad stakeholder support.

Alongside this announcement, Ofgem has published the following suite of documents: the MCA Framework, the Cost Assessment Guidance, the Financial Framework (following the consultation) and NESO’s cost benefit analysis methodology. The evidence requirements for the PA stage have also been made available.

The LDES Cap and Floor Scheme is designed to be technology agnostic and address a range of renewables such as wind and solar, helping balance supply and demand on the grid.

Beatrice Filkin, director of major projects infrastructure for Ofgem, said, “Through Ofgem’s cap and floor process we are beginning to identify the projects that we think are best placed to capture and make the most of our precious natural resources, so that we can have safe, secure and good value-for-money power”. The successful projects will be confirmed in the summer of 2026.

NESO consults on transitional Regional Energy Strategic Plan

The National Energy System Operator (NESO) has opened a consultation on its proposed transitional Regional Energy Strategic Plan (tRESP).

The tRESP is an intermediate stage between the present method of energy distribution network planning and the full reforms under the Regional Energy Strategic Plan (RESP). The RESP role is a comprehensive, long-term strategy for regional energy infrastructure development, which Ofgem has directed NESO to undertake. It has produced 11 RESPs for Scotland, Wales and nine English regions to provide inputs to the business plans developed by gas and electricity distribution networks, complementing other Great Britain-wide NESO strategic plans, such as the Strategic Spatial Energy Plan and the Centralised Strategic National Plan.

Ofgem has tasked NESO with developing a tRESP output, in order to provide an initial view of conditions and priorities for each RESP nation and region across Great Britain. Accordingly, the tRESP will help to develop the plans for the ED3 price control period which will cover 2028-2033. The development of the full RESP approach will continue alongside the tRESP ahead of its implementation from 2027 onwards.

The consultation is seeking input on the following elements of the tRESP:

• NESO's initial views on the priorities and conditions for each RESP nation and region;
• the short-term and long-term pathways for each RESP nation and region; and
• views on identification of RESP projects and areas that require strategic investment for the ED3 price control period.

NESO has indicated that between September-December 2025 it will address feedback from the consultation and undertake product development, with the aim in January 2026 of releasing the tRESP products.

This consultation is open until 3 November 2025 and any interested parties are invited to enter their responses using this link.

LCCC signs first industrial carbon capture contracts

The Low Carbon Contracts Company (LCCC) has announced its first industrial carbon capture contracts compromising two projects in the HyNet cluster. The projects are the Padeswood Cement Works Carbon Capture and Storage Project in north Wales and the Protos Energy Recovery Facility in northwest England.

Both projects aim to capture and store CO2 which will be then used for transport, pipelines and offshore infrastructure in line with the government's ambition to be capturing 20-30 million tonnes of CO2 each year by 2030. These projects are viewed as integral to decarbonising heavy industry and achieving net zero emissions.

The LCCC has long provided revenue support to the energy sector, having facilitated the Contracts for Difference (CfD) scheme (among other schemes) for over a decade as the contractual counterparty to generators. The LCCC is the named contractual counterparty for the Industrial Carbon Capture Contract ("subject to the successful completion of administrative and legislative arrangements") through which revenue support for the Padeswood and Protos projects will be delivered.

LCCC chief executive, Neil McDermott said, "These two projects represent the role CCUS has to play in decarbonising Great Britain's heavy industries and advancing energy from waste. We’re thrilled to be the counterparty to these contracts, providing these first of kind projects the confidence and certainty to proceed".

Ofgem SIF awards £8.2 million of funding to critical climate change projects

Ofgem has announced that its Strategic Innovation Fund (SIF) will award £8.2 million towards 13 projects within the energy system which are aimed at accelerating the phase-out of fossil fuels and tackling climate change.

As previously reported, the SIF provides financial support to innovative projects in periodic funding "Cycles", of which there are now three per year following Ofgem's streamlining of the fund last year. Projects are able to apply under either the Discovery, Alpha, or Beta phase depending on its progression, and submit their bids in response to various "challenges" set. The projects receiving funding this month are doing so under Cycle 3, with Cycle 4 remaining open for applications until 22 October 2025.

Ofgem's deputy director for energy systems management and security, Marzia Zafar, has stated that these innovative projects are aimed at ensuring the future of energy use is sustainable, efficient and resilient, while not losing sight of the consumer focus. With these overarching goals, the successful Cycle 3 projects within the electricity sphere include projects aimed towards the following headline challenges:

Electrification of heat: The largest individual award (£4,901,162) has been allocated to the "Cooldown" project which focuses on forecasting the demand for space cooling with a view towards helping distribution network operators (DNOs) plan their networks more effectively, and explore the possibility of a space cooling demand response system.

Faster network development: Four projects receiving funding are aiming to use novel methods to increase the capacity available on the transmission and distribution networks. These will use existing assets and faster, more efficient connection methods, leveraging digital innovations such as AI and data-based insights to reduce downtime and target upgrade investment.

In addition to these, projects have been awarded funding within the gas network with aims including the exploration of alternate usages for existing gas infrastructure, and the possibility of medium and large-scale hydrogen storage options within the East Coast Hydrogen network in North Yorkshire.

Further information on the successful projects can be found on UKRI's website.

This article was written with the assistance of Oliver Derham, Yasmine Jauffur, trainee solicitors, and Tomisin Agbonifo, paralegal