UK storage support scheme could cut battery project returns by up to 2.7 points

A UK battery project stands to lose 2.7 percentage points of internal rate of return to the government's long-duration storage support scheme. Or 0.5. Which number applies depends almost entirely on what the revenue model assumed before the scheme existed, according to analysis by research firm LCP Delta that Energy-Storage.news editor Cameron Murray reported on 28 August.

The cap-and-floor for long-duration energy storage (LDES) is already moving, with winning projects shortlisted in June, Energy-Storage.news reported. Most of that capacity looks set to go to lithium-ion battery systems, which has drawn objections from parts of the short-duration battery sector. Their concern, as the outlet describes it, is that supported projects will be able to bid into ancillary service and balancing markets at lower prices than projects earning purely merchant revenue.

LCP Delta's work is the first attempt to put a number on that concern that Energy-Storage.news says it is aware of. For anyone building or refinancing a UK battery, that makes it the reference point until someone publishes a better one.

The baseline decides whether the hit is 2.7 points or 0.5

The two figures measure the same scheme against different worlds. The 2.7-point reduction compares the cap-and-floor outcome with a system that adds no new long-duration storage at all, per Energy-Storage.news. The 0.5-point reduction compares it with LCP Delta's existing Central Scenario, in which significant LDES deployment was already expected to arrive with or without the scheme.

Whether the scheme costs a project 2.7 points or 0.5 depends less on the scheme than on what the spreadsheet assumed before it existed. That is the useful part of the finding. A revenue case built on a market with no new long-duration assets was already carrying an optimistic assumption; the scheme mostly forces that assumption into the open.

The effects also vary by location and asset specification, Energy-Storage.news noted, so neither figure transfers cleanly to any single site. For the CFO asked to sign off a UK battery investment case this autumn, the sharper question is not what the scheme does to returns but which of these two baselines the developer's forecast used, and why.

The revenue line most exposed is specific. Energy-Storage.news describes the mechanism as supported projects underbidding in ancillary service and balancing markets. According to POWER Magazine, the fast response of grid-connected batteries gives system operators a new tool for frequency regulation and for correcting short-term imbalances between generation and load, while in some markets overnight-charge, daytime-discharge arbitrage can significantly improve system economics. Read together, a project whose stack leans heavily on balancing and ancillary revenue would carry more of LCP Delta's estimated impact than one built mainly around wholesale price spreads, though the analysis as reported does not break the figure down that way.

Italy's second MACSE auction keeps the north waiting

Italy's version of the same question is geographic. Transmission operator Terna used the first MACSE auction in September 2025 to procure 10GW of battery capacity, all of it in the south of the country, and Energy-Storage.news calls that round the effective starting gun for Italian grid-scale storage. Round two runs on 24 November. Again, only the south.

Energy-Storage.news relayed a view from Giovanni Battista Rosada, ESS grid sales manager at LG Energy Solution, who asked how long the southern restriction can hold and how an investor should think about it given MACSE's 15-year contract length. Fifteen years is a long time to hold a contract in one region while waiting to see whether the next one opens another.

For a developer with land and grid positions in northern Italy, the November clearing price is almost beside the point. The decision that matters is whether to hold those sites for a future round that includes the north, or to pursue them on a merchant basis now, and nothing in Terna's round-two design as reported settles that.

Germany turns 23GWh of home batteries into one grid asset

Germany's contribution to the week is a rule change rather than an auction. New virtual power plant (VPP) rules for batteries effectively create a 23GWh grid asset out of the country's residential storage fleet, Energy-Storage.news reported. The outlet, which has historically covered Germany's grid-scale side because each utility project moves visibly toward national deployment targets, says that distinction between residential and grid-scale is now less obvious.

That aggregated 23GWh now sits alongside a grid-scale pipeline that continues to firm up. Vattenfall is going ahead with a 1GWh battery project at a former nuclear site in Germany, with company representatives providing further detail in an update Energy-Storage.news published on 14 September. And the BESS lead at RWE Renewables Europe & Australia told the outlet, ahead of Energy Storage Summit Germany 2026, that competitive total cost of ownership, detailed specifications and a strong local presence are what decide which suppliers win German grid-scale business.

Put those together and the German market looks like one in which grid services can be sourced from either end. For a supplier or aggregator, RWE's three criteria are a public checklist for the utility-scale side; the 23GWh figure suggests the residential side is becoming a competitor for some of the same services rather than a separate business.

Each market's rulebook is now part of the revenue model

None of these three items is about battery hardware. A McKinsey & Company article published on 4 March 2026, by Godart van Gendt and Jesse Noffsinger with colleagues from the firm's Industrials Practice, argues that each storage market has distinct characteristics, including country-specific regulatory guidelines and differing opportunities for value creation, and that developers need a strategy tailored to each. The firm expects the global BESS market to be worth $120 billion to $150 billion by 2030, and annual grid investment across the EU and UK to reach $120 billion by the same year, according to its Platform for Industrial Electrification research.

The UK, Italian and German items in Energy-Storage.news' roundup read as three worked examples of that argument. In one market, a support scheme reshapes the merchant revenue stack; in another, an auction's geography decides which sites have a route to a long contract; in the third, a rule change redefines what counts as a grid asset. A bid team that treats these as footnotes to a technology decision is modelling the wrong variable.

McKinsey's prescription, that developers must generate revenue through stacking and sharpen procurement and cost management, lands differently in each case. In the UK it means stress-testing the ancillary and balancing lines against LCP Delta's range. In Italy it means pricing the option value of northern sites. In Germany it means meeting RWE's TCO-and-specification bar while a 23GWh residential fleet competes for services.

The next dated marker is Terna's auction on 24 November. Whether the round-three design that follows it widens the geography will say more about Italian storage returns than the round-two clearing price will. In the UK, the signal to watch is whether subsequent modelling from other analysts lands inside LCP Delta's 0.5-to-2.7-point range, or outside it.