UK: Ofgem seeks views on LDES cap and floor licence conditions

Ofgem is seeking views on whether the proposed licence conditions are “clear, workable and proportionate, and whether they would be practical for different LDES technologies and delivery models”.

The call for input focuses on two areas: first, the key policy choices reflected in the draft licence conditions; and second, areas where Ofgem requires further evidence on practical implementation, including which provisions should sit in the licence itself, in Regulatory Instructions and Guidance, or in future policy decisions.

The draft licence conditions cover: methodologies for determining revenue to be included in the financial modelling for the cap and floor regime; adjustments to financial considerations and the financial model; how cost overruns will be dealt with; and the treatment of technical capability and availability.  The draft also include provisions on governance, reporting, and financial safeguards to protect both project developers and consumers.

Responses to the call for input must be submitted by 20 April 2026 (with the deadline for raising clarification questions with the LDES team at Ofgem being 30 March 2026). The statutory consultation is expected to be launched in Summer 2026, followed by Ofgem’s final decision on the drafting of the licences (as well as its decision on those successful projects that have applied to the cap and floor regime is also expected to be published).

What else do I need to know about the LDES cap and floor regime?

Having confirmed its decision to proceed with the cap and floor regime for LDES in October 2024, Ofgem has since been consulting on a number of elements of the design of and framework for the regime. Ofgem consulted on both the financial framework and its approach to assessing which projects should be successful in their applications for a cap and floor award, publishing its decision in relation to each of these elements of the regime design in September 2025.

On 18 February 2026, Ofgem confirmed in an open letter that section 26 of the Planning and Infrastructure Act 2025 places it under a statutory duty to establish and operate “a scheme for the purpose of encouraging the development and use of LDES installations”. The implementation of the cap and floor regime is therefore essential for Ofgem to discharge, and continue to discharge, its statutory obligation.