Ofgem was clear about what it wanted from the first LDES window: projects that maximise benefit to consumers without relying on their floor. It is minded-to back 11 lithium-ion batteries in the first cap-and-floor window, from 8 to 18 hours, and scored the longest-duration batteries highest, according to the economic assessment. What it did not publish is the numbers behind the scores, which developers will need for the next window.

Ofgem has assessed the scheme as a good deal for consumers, based on their revenue projection. Ofgem expects cap-and-floor payments to be "broadly neutral over time in direct bill terms", while the storage projects lower system costs. In effect, consumers get the system benefits of the LDES batteries without paying anything extra for them through the scheme. The floor makes that possible by underpinning the project finance.

Working back from Modo Energy's forecast, a battery of any duration stays clear of its floor if it is built for £1.5m/MW or less. Our capex survey of today's shorter-duration batteries puts only the shorter Window 1 projects under that line. However, longer duration batteries built at costs like those in Italy's MACSE auction, or below, clear it at every duration.

If the LDES cap-and-floor scheme is a success, the question for future rounds is how far to take it. That needs a clearer blueprint from Ofgem (and NESO) of what it wants built, and where.

Why this matters for investors

GB's 8.2 GW battery fleet was built without subsidies or incentive schemes. Developers chose the projects with the best returns, and that produced a fleet of short-duration batteries.

The cap and floor is a different route, and a potential turning point for GB storage. Its floor lowers the cost of borrowing, and the projects it backs are chosen by Ofgem first on their value to the system and consumers, with returns treated as a financial screen rather than the goal. Investors looking at a second window need to know what Ofgem values, and the hurdles a project has to get over.

How Ofgem chose the projects

Ofgem started by scoring each project's value to the system, in what it calls the Economic Assessment. The benefit-cost ratio carries 40% of the weight, security of supply 19%, avoided renewable curtailment 15% and system operability 12%. Three smaller measures make up the rest.

It then adjusted that ranking in two ways. A Financial Assessment moved down projects with a materially elevated risk of relying on their floor payments. A Strategic Assessment checked deliverability and how robust each project's ranking was across different scenarios.

The 16- to 18-hour projects average 97.2, against 71.5 for the 8- to 12-hour projects. Security of supply and avoided curtailment account for most of that gap. The shorter projects score higher only on system operability.

On value for money, the 16- to 18-hour and 8- to 12-hour groups are close, at 33.9 and 31.4. Ofgem's benefit-cost ratio divides each project's system benefit by its own submitted costs, so the longer-duration projects keeping pace suggests they expect to build for much less than today's costs imply.

The Financial Assessment then deprioritised some projects. Two liquid air projects ranked 10th and 11th on economics but were moved down, as were ten vanadium flow projects and two pumped hydro schemes. All 11 lithium-ion projects passed.

Ofgem's direction of travel is clear. Drawing on NESO's capacity advice, it notes that capacity modelling shows "a preference for longer-duration assets in the first instance". What it has not published is how much longer, or what each extra hour is worth.

What the batteries earn

A 200 MW, 2 GWh (10-hour) battery in Northern Scotland earns £216k/MW/year on average between 2030 and 2049, using Modo Energy's Central revenue forecast. At 4 GWh (20 hours), it earns £262k/MW/year: 20% more for twice the energy capacity.