The UK faces an urgent need for long duration energy storage to support its renewable transition, with grid inefficiency costs projected to rise to £3.5bn by 2030
The government’s new cap-and-floor scheme aims to provide guaranteed minimum income for developers while protecting consumers from excessive costs
Multiple LDES technologies are competing for market share, with several major projects already under development across the UK
While technical solutions exist, the main barriers to LDES adoption are financial and regulatory – projects require large upfront capital, face complex planning regimes, and need more certainty about future market mechanisms to attract investment

Long-duration energy storage will be fundamental to the UK’s energy transition. With a new government incentive scheme, when will the industry compete with dispatchable gas plants in the power generation mix?

It’s a question that has dogged the energy transition since its inception: where do you get electricity when the wind doesn’t blow and the sun doesn’t shine? Renewables like wind and solar provide plentiful – and cheap – electricity, but when the weather conditions aren’t right, ‘dispatchable power’ sources have to fill the gap.

The service is typically provided by fossil fuel-based power plants – primarily gas-fired ones in the UK. This creates a headache for the country’s climate policymakers and their goals to decarbonise the power system by 2030 and reach net-zero emissions by 2050.

New nimble

That’s where long duration energy storage (LDES) comes in. When the wind blows and sun shines, they produce more energy than the grid can use. But LDES technologies like pumped hydro, compressed air storage and advanced batteries store that excess energy for lean times. They are able to produce electricity for hours or even days when renewables are offline.

The trouble is that LDES is cumbersome and expensive, and nobody has figured out how to make it as cost-competitive and nimble as dispatchable sources like gas plants. But the sector is evolving, and the technologies are fast improving.

In October, the government announced a new ‘cap-and-floor’ scheme offering LDES developers a guaranteed minimum income, in return for a limit on revenues. The aim is to spur investment.

But the million dollar question is whether this will be enough for LDES to usurp dispatchable gas plants in the grid’s power mix. And, if so, when?

State of the UK’s power play

The government aims to decarbonise the power system by 2030. Wind and solar demonstrated strong progress in 2023, achieving record output, comprising 29% and 5% of the electricity generation mix respectively. The last coal power plant, Ratcliffe-on-Soar in Nottinghamshire, closed in September, marking a 98% reduction in coal since 2013.

However, gas remains king of the grid, with 32% of power generation in 2023.

Source: NESO

The UK has 3 GW of LDES capacity from four pumped hydro storage projects built four decades before the energy system’s privatisation, making up about 1% of the power generation mix. The National Electricity System Operator (NESO) has estimated the UK will need 11.5-15.3GW of LDES by 2050 to achieve net zero.

“The reason we don’t have more LDES is because there hasn’t been a need for it yet: there hasn’t been enough renewables in the grid to need the storage to back up their variability,” explained Naomi Baker, senior policy manager at trade association Energy UK.

“The high upfront costs, long construction timeframe and lack of foreseeable revenue have made it impossible to finance LDES projects to date. The dispatch system also has to be adapted to allow for their use, which is a challenge for the system operator.”

As the 2030 deadline approaches, demand for low-carbon dispatchable power will grow, exacerbated by planned gas and nuclear plant decommissioning. The grid will require gas carbon capture and storage (CCS), hydrogen-to-power and biomass with CCS to hit that target, according to Baker.

Wind’s needs

“We’re going to need all the tools in the toolbox,” she said. “We will need LDES, low-carbon dispatchables, as well as the demand flex and short-duration storage – all of it. We also need it all to be able to compete, because that’s where we get the lowest cost to the consumer. And the technologies will have different roles, and will come onstream at different times.”

LDES is crucial for the UK’s wind-based system compared to a solar-based one like Spain’s. Solar is more predictable, with short-term battery storage handling more of the balancing load. With wind, there’s more variability.

A strong cost incentive exists for increasing the LDES share in the UK’s power mix. Recent analysis by energy storage developer and operator Field estimated that firing up gas power plants in England and Wales and switching off wind farms in Scotland cost bill-payers £920 million in 2023.

By 2030, these “curtailment costs” will rise to £3.5 billion a year. Using energy storage technologies more efficiently to unlock capacity on the existing transmission network could cut this by 80%.

LDES could also allow for a cheaper generation mix. “Our modelling suggests that having more storage would allow the UK to build more wind and less nuclear, which is great because wind is half the price of nuclear,” said Goran Strbac, a professor of electrical energy systems at Imperial College London.

Tools in the toolbox

The UK has various LDES technologies from which to choose. Pumped storage hydropower (PSH) stores energy by pumping water into elevated reservoirs and then releases it to spin turbines as it flows back down.

Compressed air works similarly. It forces air into underground caverns, then releases it to drive turbines.

Flow batteries store energy in liquid electrolytes in tanks. They produce electricity as the electrolytes flow through a cell.

Thermal storage systems, like molten salt, capture heat. This heat is later converted to electricity.

Hydrogen storage uses surplus power to split water into hydrogen, storing it for later use in fuel cells or combustion to generate power.

Electrochemical storage solutions like sodium-ion batteries offer an alternative to lithium-ion. They use more abundant materials – like salt – to store electricity chemically for extended use.

Bottom line

Each technology has its advantages. Which will rise to the top is a matter of opinion and money.

Firstly, the technology “needs to be really cheap to increase its storage capacity,” said George Hilton, batteries and energy storage research manager at S&P Global. This favours PSH and compressed air because you can increase the reservoir or cavern size. This is also the reason lithium-ion batteries aren’t effective for LDES.

“If you want to add more storage, you’ve got to buy more batteries, and they don’t get any cheaper just because you’re buying more”, explained Hilton.

Secondly, the technology should leverage existing technology from other industries. “The LDES segment isn’t large enough to drive technologies down the cost curve quickly enough to be deployed at scale,” said Hilton.

A good example is compressed air. This uses a common gas turbine, so the supply chain is already established and the technology can be deployed at low cost.

The third factor is how quickly the supply chain can scale up and whether new factories are needed. Lithium-ion batteries benefit from 10 years of supply chain development for the electric vehicle (EV) industry.

With flow batteries, you need to build and scale the factory, requiring significant upfront capital expenditure.

“And if you put those three filters on, compressed air comes out pretty attractively, and pumped hydro comes out quite attractively – but that does require mountainous terrain – and in the longer term, hydrogen storage comes out quite attractively too,” said Hilton.

Battery competition

BloombergNEF’s (BNEF) inaugural Long-Duration Energy Storage Cost Survey recently found the cheapest LDES technologies offer cheaper storage than lithium-ion batteries over eight hours.

Thermal energy storage and compressed air storage had average capex of $232 per kWh and $293 per kWh respectively. In comparison, lithium-ion systems had an average capex of $304 per kWh for four-hour duration systems in 2023, so generally shorter-term storage.

Source: BNEF

Vehicle-to-storage (V2S) is a storage technology using lithium-ion batteries. V2S uses EVs as grid-connected energy storage, leveraging their batteries to store and discharge electricity, allowing energy flow between the grid and EVs.

“By 2035, there will be more than 40GW of batteries in London’s buses and taxis. Do we need any other batteries? If we make this V2S concept work, it can provide all the storage we need,” suggested Imperial’s Strbac.

NESO is targeting up to 81 GWh of LDES by 2030. There are a number of projects under development. PSH is a cornerstone of the UK’s LDES strategy.

Drax is expanding its Cruachan facility in Scotland with a new 600 MW plant, while SSE is moving forward with a £1.5bn hydro project in the Highlands. Both projects are shovel-ready and construction is expected to begin soon.

Innovation

In parallel, RheEnergise is working on a novel dense liquid pumped hydro technology for smaller-scale projects that don’t require mountainous terrain. This may be a significant innovation in this space.

Liquid air energy storage (LAES) is gaining momentum. Highview Power is leading the charge, starting with its £300 million Carrington plant near Manchester. This will provide 300 MWh of storage capacity.

The ambitious Hunterston project in North Ayrshire, will be the first of four planned facilities across Scotland and northern England. The 2.5 GWh plant, delivering eight times Carrington’s capacity, will roll out in two phases. The first focuses on grid stability and the second on a full LAES build-out.

Battery energy storage systems (BESS) are expanding. For instance, Apatura is leading development in Scotland. The company’s 700 MW project in Port Glasgow is the largest stand-alone BESS approved in Scotland. Cheesecake Energy is advancing compressed air storage systems with government support, while Invinity Energy Systems is developing advanced vanadium flow batteries.

These projects show promise. But there are significant challenges in the way of widespread adoption.

Barriers to scale

Fundamental barriers are preventing the LDES market from growing in the UK. Unlike short-duration storage, it can’t scale incrementally, it needs to go from zero to 100 almost immediately.

For 50 MW pf power capacity, needing 50 hours of storage, you need 2.5 GWh of storage. “You can’t really do LDES at small scale, it has to be done at large scale,” said Hilton.

For an asset-intensive technology, companies find it difficult to raise funds for the first plants and navigate the UK’s complicated planning regime.

“The full scale-up of LDES technology requires considerable investment,” said Richard Butland, chief executive of Highview Power. “It took us almost three years to get the finance we needed to start developing our Carrington project, and we had already proven our technology.”

Regulatory barriers exist as the country’s market design has focused on short-duration lithium batteries, providing limited incentives to LDES. “However, this is changing very rapidly now with the introduction of initiatives like the cap-and-floor scheme,” said Jonathan Marren, CEO of Invinity Energy Systems.

Dispatchable challenge

The cap-and-floor mechanism should encourage investment and lead to numerous project announcements in the coming years. It will serve as a minimum revenue floor for the investor, providing security to borrow low-cost capital for project development.

The cap ensures that any revenues above a certain amount are shared with the bill payer. “So it reduces the risk, but then shares any profit above a certain threshold,” explained Baker.

How quickly can the market scale to compete with dispatchable power sources like gas plants? Can you generate renewable power, store it in LDES technology and dispatch it to the grid on demand at a lower cost than fossil fuel systems?

In most regions, renewable power is already cheaper than fossil fuel-based generation.

For Baker, the question isn’t the speed of LDES technology development, but the speed of renewables deployment. A renewables-dominated grid results in longer supply gaps where LDES balances.

Clock ticking

“We don’t have enough renewables to have the need for that longer balancing,” she said. “But when we do, then these technologies will be able to compete. However, we need spades in the ground now or next year for these projects to be ready in time.”

Marren believes Invinity will have a product that can deliver the required levelised cost of energy (LCOE) within two to three years. “At that stage, developers and grid operators worldwide will, from a purely economic perspective, prefer to rely on the combination of renewables and our batteries to serve the grid’s needs.”

On the change

GetFocus, an AI-based analysis platform predicting technological breakthroughs based on global patent data, forecasts that several LDES technologies will become cost-competitive by the decade’s end.

Achieving a LCOE of around $50 per kWh “is the point when energy storage matches the cost of using dispatchable power sources like gas power plants,” explained Kacper Gorski, GetFocus’s head of operations.

Source: GetFocus

According to the research, sodium-ion batteries are improving faster than other LDES technologies. They are set to be cost-competitive for mainstream use by 2027.

The research found that sodium-ion batteries hold the most promise among 30 LDES technologies, due to their fast improvement rate – around 57% in 2024. They offer more efficiency in round-trip energy use, greater operational flexibility and lose less energy during storage and supply.

Their rapid improvement will likely lead to better energy density and reduce the cost per unit of stored energy. This positions them as a versatile option across the energy grid, even in large-scale operations, the report found.

Gorski believes that batteries are the best way to store energy, compared to other LDES.

“You can develop a new generation of batteries incredibly quickly in comparison to something like compressed air – with all that infrastructure,” he said. “You can tweak the chemistry pretty quickly, and you can do it on a small scale and be fairly confident that you will be able to ramp it up to whatever storage requirement you need.

“But it is a bit ‘horses for courses’ with LDES,” he caveated. “There might be some other solutions, like the phase change or compressed air, that are more attractive in certain locations.”

Source: GetFocus

Exciting years ahead

Britain’s energy regulator is designing the cap-and-floor scheme, aiming to open the first round to applicants in 2025. The next step is the release of the final technical decision document, due this winter.

The regime will have two streams. One is for established technologies, like PSH, and the second for less mature technologies, like liquid or compressed air, or innovative batteries like sodium-ion. However, one researcher warned E-FWD that a lack of competition between the two streams could result in the government “picking losers, rather than winners”.

All interviewees were broadly positive about the scheme. Hilton believes it will attract a different kind of investor. Projects will be able to access debt, rather than just equity, for project financing. Bringing in finance from banks, rather than just private equity firms, will lower the cost of capital.

“It will be a bit more suited to long-term strategic infrastructure investment than the way that the storage sector has developed so far,” he said.

Looking ahead, the government needs to help catalyse the LDES market before it can stand commercially. Marren wants initiatives that promote domestic manufacturing or at least level the playing field while domestic manufacturers mature their supply chains and achieve the economies of scale of offshore lithium battery manufacturers.

“For instance, the current tariff structures in the UK promote importing finished battery products from China and other countries rather than importing components to manufacture batteries domestically,” he said.

Investors need more certainty about the future energy system of 2030, which NESO has been tasked with re-designing. That will allow investors to project revenues and determine the best equipment to invest for those future needs.

All of the above

“There’s too much uncertainty at the moment,” said Baker. “On one hand, the investors have the uncertainty about how the different technologies in this space compare. And on the other, there’s the uncertainty about what the future system will be and how the market mechanisms will work.”

The UK’s energy storage future appears to lie not with a single panacea, but a range of different assets and technologies. Much like how generation comes from a diverse roster, so too should storage – and it will be all the more robust for its diversity.

The key breakthrough in the short term is getting large-scale projects up and running. The cap-and-floor scheme provides some much-needed certainty, while different technologies are all making crucial ground.

“The cap-and-floor scheme is the most exciting development for LDES in years and is going to play a very important role in the roll out of LDES at scale in the UK,” concluded Marren. “We’re gearing up for a very exciting few years ahead.”

The race to decarbonise the UK is on. Energy storage will have a crucial part to play. Thus far, it has been overlooked and overshadowed by the progress the country has made in generation, most notably in offshore wind.

But as more wind is brought onto the grid, and curtailment payments increase, the need for energy storage – and a solution to transmission – will become ever more urgent.

Related Content

Why Aberdeen will have new energy in 2025

UK’s strategic energy plan banks on hydrogen storage