The UK’s leading battery storage developers have warned that flawed government policy could cost consumers billions by unfairly sidelining battery energy storage systems (BESS) in favour of older, less efficient technologies like pumped hydro.
In a joint letter, major BESS operators – representing 1.9GW of capacity, or over a third of the UK’s operational battery fleet – have raised serious concerns over Ofgem’s approach to supporting long-duration energy storage (LDES) through a new “cap and floor” subsidy scheme.
They say the current policy introduces systemic bias against BESS, which is not only the most cost-effective option but also the quickest to deploy.
At the heart of the row is research by consultancy LCP Delta, which finds that lithium-ion batteries are the most competitive long-duration technology and could save the public £2.2 billion compared to alternatives.
But despite being initially excluded from the LDES scheme and only added after industry pressure, BESS projects still face barriers under Ofgem’s latest technical guidelines.
One of the key concerns is that the scheme will distort the market by subsidising up to 7.7GW of non-battery LDES technologies, undermining the government’s wider Clean Power 2030 goal to deploy 27GW of battery storage.
LCP Delta estimates that shorter-duration batteries could see operating margins fall by 12%, reducing overall deployment by 20%.
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The letter also criticises Ofgem’s reliance on outdated cost assumptions from 2020.
Since then, battery prices have dropped by around 40%, making them highly competitive even at durations of 12 to 20 hours or more – with further savings expected.
BESS also offers higher efficiency (up to 90%), faster build times, lower environmental impacts, and fewer geographic constraints compared to pumped storage hydro (PSH).
The signatories are calling on Ofgem to conduct a full cost-benefit analysis, arguing this would show BESS as the best option at every viable duration.
They warn that continuing to back older or unproven technologies risks deterring investment and undermining fair competition.
“We support a level playing field,” the letter states. “Trying to pick winners sends a signal the UK is closed to investment.”
The companies who signed the letter are; Gresham House Energy Storage Fund, Harmony Energy, Zenobē, Field Energy, Eku Energy, Adaptogen Capital and Voltwise Power.
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