Consultation on Long Duration Electricity Storage Project Assessment

What changed

Ofgem has confirmed the Multi-Criteria Assessment (MCA) framework that will decide which Long Duration Electricity Storage projects clear the first window of the cap and floor regime. The decision was published on 23 September 2025 after a consultation that closed in late June and drew 44 responses from developers, trade bodies, and investors. NESO does the technical assessment work; Ofgem makes the call.

The settled approach has four load-bearing features. Projects are scored on economic, strategic, and financial merits with no fixed weightings, which leaves Ofgem and NESO discretion to rank applicants rather than mechanically aggregating scores. The economic case rests on a socio-economic welfare model, but with explicit added weight on deliverability, the credibility of revenue forecasts, and wider system benefits. Competitive bidding is restricted to two parameters, meaning bidders compete on price-like variables in a narrow band rather than across the full assessment. And the modelling counterfactuals, the alternative system futures projects are evaluated against, have been reworked so that pumped hydro, lithium-ion, compressed air, and hydrogen are not measured against backdrops that flatter any one of them.

What this means in practice

The cap and floor regime guarantees a revenue floor in exchange for clawing back upside above a cap. That financial design is set in a sister document. This decision is the gate that determines who gets to stand in front of that revenue line in the first place. Without a place on the MCA-approved list, an LDES developer has no route through the Window 1 regime regardless of how good its asset economics look on paper.

Three things matter for applicants now. First, the absence of predetermined weightings is the single biggest signal. A weighted scorecard would have told developers which technology family was favoured. A discretionary panel using the same three buckets does not. That favours technologies that can demonstrate strategic system value alongside cost, which in practice means pumped hydro, where the asset life and energy-to-power ratio dominate the welfare modelling, and arguably disadvantages shorter-duration storage trying to stretch into the LDES bracket on duration alone.

Second, the explicit focus on deliverability and evidenced revenue forecasts puts a premium on projects with planning consent, grid connection offers, and credible offtake assumptions. Speculative entries with novel chemistries and thin construction track records were always going to struggle; this framing makes that explicit. Hydrogen storage projects in particular will need to show a defensible revenue stack, not a hand-waved future hydrogen price.

Third, limiting competitive bidding to two parameters constrains how much price tension Ofgem can extract from the process. Pumped hydro and battery have radically different capex per MWh and operating profiles. Forcing them to compete on a small set of bid variables means the welfare and deliverability scoring does most of the sorting, and the bidding does the marginal price discipline.

Who pays. Consumers, via network charges, fund the cap and floor scheme. The floor is a transfer from billpayers to LDES operators when wholesale revenue falls short; the cap recycles revenue back when it overshoots. The MCA decision shapes the cost profile of that transfer by selecting which assets sit inside the regime. Pumped hydro at scale costs less per delivered MWh over a 50-year life than a series of shorter-duration projects, but front-loads capex and locks billpayers into a long contract. The choice between cohorts is a choice about the shape of the consumer liability, not whether there is one.

What happens next

The regime now moves to the project assessment stage. Eligible projects from the Window 1 applicant pool, which opened on 8 April 2025, are asked to submit further information against the confirmed MCA. NESO runs the assessment methodology published alongside the decision; Ofgem takes the final view on which projects pass to the cap and floor offer stage.

This decision should be read alongside the financial framework decision and the LDES cap and floor financial model and handbook, which together set the revenue mechanics. The MCA framework determines eligibility; the financial framework determines the contract. The two were always going to ship together, and the publication sequence is now complete for Window 1.

Three further items to watch. First, the Window 1 project list itself, which will reveal how the discretionary scoring landed across technology families. Second, any guidance Ofgem issues on the two competitive bidding parameters, because the choice of parameters determines whether the auction-like element bites or is essentially decorative. Third, the design of Window 2. The Government's Clean Power 2030 target implies more than one cohort of LDES contracts, and the lessons Ofgem draws from Window 1 selection will feed directly into how rigid or flexible the next round's criteria become. Developers shut out of Window 1 will be reading the published assessment rationale closely for signals on how to reposition for Window 2.