LCP Delta: UK LDES cap and floor could reduce IRRs by 2.7 percentage points
The long-duration energy storage (LDES) cap-and-floor support scheme in the UK is well underway, with winning projects shortlisted in June. Most of the capacity looks set to go to lithium-ion battery energy storage systems (BESS) which many in the industry have opposed.
Those opposed say it will negatively affect the buildout of short-duration BESS, as you’ll have a bunch of subsidised BESS projects able to bid into ancillary service and balancing markets at lower prices than the unsubsidised ones.
Research firm LCP Delta has done some analysis on this question, the first we are aware of.
Their analysts estimate that, compared to a scenario with no new LDES on the system, the scheme leads to project IRR reducing by 2.7 percentage points. However, compared to LCP’s existing Central Scenario, where significant LDES deployment was already anticipated, the IRR reduces by just 0.5 percentage points. The impacts very by location and asset specifications, obviously.
