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The decision follows a consultation earlier this year in which Scottish Renewables advocated for a "cap and floor" mechanism to incentivise investment in LDES. The government's newly announced scheme adopts this approach, offering developers a guaranteed minimum income while also limiting potential revenue windfalls.
The cap and floor model is designed to provide a stable and predictable investment environment for LDES projects, fostering confidence and encouraging private sector participation. This initiative is a crucial step towards ensuring a secure and reliable energy supply in the UK as the country transitions to a low-carbon economy.
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Ofgem has agreed to act as regulator and delivery body and the scheme's first round is expected to be open to applicants next year.
Andrew MacNish Porter, Head of Economics and Markets, said: "We are pleased that DESNZ has confirmed a cap and floor scheme will be introduced to support investment in long-duration electricity storage, such as pumped storage hydro.
"As we deploy more renewable energy, long duration storage is essential for ensuring clean power generated by renewables can be stored for when we need it most.
"The cap and floor scheme will bring forward investment in these vital projects so they can begin delivering benefits to consumers and providing new jobs and economic growth across Scotland.
"We are encouraged that Ofgem has been appointed as the delivery partner for the cap and floor as we recommended in our response to the UK Government's consultation earlier this year.
"We now urge Ofgem to move swiftly in developing the details of the cap and floor scheme. With support from industry, Ofgem must act with urgency to ensure that cap and floor is implemented as soon as possible to allow shovel ready pumped storage hydro projects in Scotland to begin construction."
