2026-043 LDES Economic and Financial Support

Ofgem is nearing completion of the first application window (Window 1) for LDES, with projects having progressed through eligibility and detailed project assessment stages. The current phase of the programme is focused on final awards and finalising licence parameters and preparing for licence awards, expected in Autumn 2026. This represents a critical transition from policy development to implementation.

As the regime moves into delivery and future allocation rounds, Ofgem requires robust, evidence-based approaches to project specific economic assessment, revenue modelling, and project evaluation. Setting cap and floor levels relies on a robust understanding of project financial viability, including the interaction between costs, revenues, and risk. There remains a risk that poorly evidenced or unrealistic financial assumptions could lead to inappropriate support levels, thereby exposing consumers to unnecessary cost and risk. This principle remains central as Ofgem (i) finalises decisions for Window 1 projects, (ii) monitors and refines the regime during

implementation, and (iii) incorporates lessons learned into the design and delivery of future application windows.

Ofgem therefore requires require ongoing economic and financial consultancy support from a supplier to deliver and evolve their respective regulatory regimes, including the final phase of the Window 1 licence award process through to the construction phase of licensed projects, to ensure best value for money for consumers. This support will also be needed across future application windows, which will involve multiple assessment cycles with varying volumes and complexity of applications. The supplier will also be needed to provide specialist economic and financial expertise in electricity markets, economic analysis, and financial forecasting/ analysis to

complement internal capability and targeted system modelling commissioned separately e.g. from the National Energy System Operator (NESO). The supplier will be expected to actively undertake and deliver defined analytical outputs to support project level assessments for Ofgem, including:

• Detailed review, independent validation, and structured evaluation of developer submissions (including financial models, cost assumptions, and revenue projections), clearly documenting findings and recommendations.
• Quantitative and qualitative assessment of social-economic benefits, including development and application of appropriate economic appraisal frameworks where required.
• Development of market revenue forecasts under different scenarios, identification of key commercial risks, and sensitivity analysis to inform regulatory decisions
• Production of concise, decision ready advice and written reports to support "minded to" and final regulatory positions, including clear justification of assumptions, methodologies, and conclusions.