Long Duration Electricity Storage (LDES) window 1 eligibility assessment outcome

What changed

Ofgem has confirmed which Window 1 LDES applicants pass the eligibility filter and will progress to the substantive Project Assessment stage, which opened on 23 September 2025. The eligibility outcome closes the first procedural gate in the cap and floor scheme: applicants that submitted by the 9 June 2025 deadline have been tested against the Eligibility Criteria Assessment Framework (ECAF) published alongside the application window, and only those that cleared it now sit inside the multi-criteria approach (MCA) pipeline.

The decision is administrative rather than substantive. Eligibility says nothing about whether a project will receive a cap and floor award, what the strike levels will be, or whether it will be built. It says only that the application is well-formed enough to be worth assessing in detail. The eligible cohort will be evaluated under the MCA framework Ofgem published in parallel, with first awards targeted for Q2 2026.

What this means in practice

The eligibility stage is a screen for project viability and application completeness, not a competitive ranking. Applicants had to demonstrate they could deliver into one of two delivery tracks (Track 1 by 2030, Track 2 by 2033, aligned to the Clean Power 2030 target) and that the technology meets the LDES definition of at least 6 hours' duration at rated output. Pumped hydro, compressed air, liquid air, and flow batteries are the technologies that fit the duration threshold; lithium-ion does not, which is the point of running a separate scheme rather than relying on the Capacity Market.

For developers that passed, the regulatory clock now runs to a Q2 2026 award date. That is fast by GB infrastructure standards and slow by developer cash-flow standards. The Project Assessment stage will set indicative cap and floor levels per project, with the cap recovering revenue above a ceiling for consumers and the floor underwriting a minimum revenue if wholesale and balancing income falls short. The floor is the mechanism that does the work: it converts a merchant LDES project, which would otherwise face 15-20 year revenue uncertainty across volatile arbitrage spreads, into something a project finance bank will lend against.

For developers that failed eligibility, the route is to reapply in Window 2, expected to open after Ofgem has worked through Window 1 awards. The screened-out cohort matters as a data point: it is the first revealed evidence of how much of the pipeline that DESNZ and trade bodies have been citing (often quoted as 20 GW of LDES proposals in development) is actually application-ready under a real regulatory framework. Headline pipeline numbers and ECAF-compliant applications are different categories.

For consumers, the eligibility outcome itself changes nothing on the bill. The cost only crystallises when awards are made, floors are set, and the first floor payments are triggered. That will not happen until projects build, commission, and underperform their floor in a given settlement period. The earliest material consumer exposure is late this decade.

For the wider market, the more interesting signal is what cap and floor does to the merchant economics of competing flexibility: lithium-ion batteries with two-hour duration, demand-side response, interconnectors, and gas peakers. A floored LDES fleet will arbitrage the same intraday and inter-seasonal spreads, compressing the spreads that all the unfloored assets depend on. That is the standard administered-mechanism-distorts-merchant-market dynamic that CfDs created for thermal generation, applied to flexibility. The Capacity Market is the partial offset, but CM clearing prices already reflect expectations of where the merchant stack will sit.

What happens next

Three things to watch. First, the Project Assessment outcomes themselves, expected to land into Q2 2026, which will reveal indicative cap and floor levels, the technology mix that clears, and the geographic distribution. Pumped hydro projects in Scotland will dominate the headline MW figures if they clear; the more interesting question is whether non-pumped-hydro technologies (compressed air, flow batteries) survive the assessment.

Second, the Window 2 design. Ofgem has flagged that the cap and floor regime is iterative, and the Window 1 cohort will inform what is tightened, loosened, or repriced in Window 2. The question is whether the floor levels in Window 1 turn out to be too generous (in which case Window 2 tightens and Window 1 awardees lock in rents) or too tight (in which case Window 1 underclears and Window 2 reopens at higher levels). Either outcome has distributional consequences for consumers.

Third, the interaction with the Review of Electricity Market Arrangements (REMA) and the locational pricing question. A floored LDES project sited in a constrained zone collects floor payments funded by consumers even when the wholesale market would otherwise tell that asset not to operate. Zonal pricing would alter the merchant signal LDES is arbitraging against, which would alter the floor's likely call-rate, which would alter the consumer cost. The two workstreams are running on incompatible timelines: cap and floor awards by Q2 2026, REMA outcome later. The first cohort of LDES awards will therefore be priced against an electricity market design that may not exist by the time they commission.