The United Kingdom (UK) government launched a new scheme to help build renewable energy storage infrastructure in the country. The scheme promotes the development of the first major long-duration energy storage (LDES) facilities in over 40 years, creating backup renewable power and improving the UK's energy security.

The new scheme provides financial security for private investments in energy storage infrastructure, encouraging private equity/credit firms, asset managers, and impact investors to invest in renewable energy storage that have been undervalued for more than four decades. 

Let's explore the new renewable energy storage scheme of the UK in detail. 

About the new UK Scheme

The new scheme launched by the UK government is a set of guidelines for energy storage based on a cap-and-floor finance mechanism to stimulate investment in LDES technologies for enhancing renewable energy infrastructure. The guidelines remove the barriers which have withheld the building of new energy storage facilities for nearly 40 years. 

The scheme introduces a revenue 'cap' for LDES facility owners to limit the earnings to a specific amount, and any profits above that amount threshold should be shared among the consumers. Conversely, there is a 'floor' price to guarantee a minimum earning for developers, to provide them with financial security and to ensure they don't lose money. 

The cap-and-floor scheme is expected to unlock billions of dollars in funding by providing developers with a minimum income, create thousands of new jobs, and contribute to the UK's net-zero goal. 

The Energy Minister of the UK, Michael Shanks said, "We're reversing a legacy that has seen long-duration storage built for 40—years and taking steps to unleash private investment in both established and new technologies."

Key aspects of the new UK Scheme

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  The announcement of this renewable energy storage scheme follows a consultation held earlier this year, which proposed a cap-and-floor mechanism to encourage investment in LDES technologies. 

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  The scheme will support LDES technologies such as pumped storage hydro, liquid air energy storage, compressed air energy storage, and flow batteries. These technologies act like large batteries that store renewable energy for later use, enhancing energy security and grid stability. 

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  The UK government's renewable energy storage initiative is expected to save approximately £24 billion between 2025 and 2050 by reducing reliance on natural gas and lowering household energy bills. 

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  The Office of Gas and Electricity Markets (Ofgem) is responsible for regulating and delivering this scheme. To secure funding and regulatory support, the first round of applications is expected to open in 2025, with separate programs for mature and innovative technologies. 

While you’re here…

The new scheme introduced by the UK government is a great opportunity for the financial institutions, private equity and credit firms, asset managers, and impact investors to invest in LDES technologies and gain an edge while contributing positively to the environment. 

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