Citizens Advice Response to Ofgem Consultation on LDES Cap and Floor Minded-To Decisions

Citizens Advice Response to Ofgem Consultation on LDES Cap and Floor Minded-To Decisions 464 KB

We recognise the need for more long duration energy storage (LDES) in the electricity system. LDES is necessary as a consequence of installing more renewable generation.

There is significant short-term storage available (i.e., operating up to 4 hours). LDES is important for longer periods of low wind output, particularly in winter. It can reduce the market power of gas at such times by expanding the share of long-duration storage in the merit order. 

While we therefore welcome the intent to incentivise the deployment of new LDES capacity, the current LDES cap and floor framework is not without consumer risk. We recommend that Ofgem takes the following actions to address risks to consumers:

• Before proceeding with the cap and floor regime, Ofgem should reopen its decision on the indexation of the floor to outturn inflation. The analysis to date has not adequately considered the consumer risks from persistent above target inflation. We support an alternative approach to inflation indexation: option a) in the 2025 consultation. 

• Before proceeding with the cap and floor regime, Ofgem should undertake detailed analysis of possible floor reliance due to the potential revenue suppression effects of new LDES capacity across electricity markets.