Assessment of community, environmental and landscape impacts in Long Duration Electricity Storage Cost Benefit Analysis

Under the Long Duration Electricity Storage (LDES) cap and floor mechanism, community, environmental and landscape impacts are evaluated as part of the decision-making framework through Ofgem’s assessment framework, including the Cost Benefit Analysis (CBA). These factors can be categorised as “hard to monetise impacts” since they are inherently difficult to quantify in financial terms. Ofgem confirms it will “draw” on existing planning and permitting decisions, the inference being that it will not conduct its own assessments of these impacts or create a separate monetary valuation framework within the cap and floor decision-making process.

What might the evaluation process of these impacts look like?

Approach to community impacts assessment

Community impacts are typically assessed during the planning process by Local Planning Authorities (LPAs), by government agencies and through both stakeholder and public consultations required under UK planning laws.

Key assessment methods are likely to include the following:

• Environmental Impact Assessments (EIAs): Required for large infrastructure projects, including LDES, to assess the environmental impacts of the scheme.
• Public consultations and objections: Developers must engage with local stakeholders to address concerns related to noise, disruption and socio-economic changes.
• Equality impact assessments: Carried out to ensure those with protected characteristics in the local communities are properly considered.
• Section 106 Agreements (in England) and Section 75 Agreements (in Scotland): Legally binding agreements that oblige developers to contribute towards local infrastructure/community initiatives and/or provide measures on-site or off-site to mitigate the impacts of the scheme (e.g. open space, landscaping etc).
• Community benefit funds: Requires developers to put money into a fund which is then made available to community groups to be used towards learning and education.

The key community-related issues likely to be considered by planning authorities are: disruption to local communities (construction noise, traffic and long-term land use); local economic benefits, including job creation and inward investment; and community support or opposition, particularly from public consultation processes.

A proposed project will not get through the eligibility stage unless planning consent is in place by the start of the project assessment phase (end of Q3 2025). There is an exception to that general position in relation to projects that are deliverable by 2030 – such projects just need to demonstrate an ability to secure planning consent in sufficient time to allow for a 2030 delivery.

Ofgem’s “Consultation on Project Assessment for LDES Window 1” document indicates that Ofgem will assume that planning authorities have assessed positive and negative impacts of projects in their decision-making process. Moreover, Ofgem is proposing to assume that, to the extent that any negative impacts have been identified, appropriate mitigations will be included as conditions to any consents granted.

Where Ofgem may go beyond a binary check on planning consent being granted is where a developer can demonstrate a positive impact. In such circumstances, developers need to have carried out proportionate analysis in line with Green Book guidance (HM Treasury’s guidance on how to appraise policies, projects and programmes) and provide Ofgem with appropriate evidence in support of such positive impact.

Consequently, where community benefits are strong (e.g. local training, local job creation, investment in infrastructure), Ofgem may consider these as qualitative factors influencing project eligibility or support levels.

• Ofgem is likely to ensure that community impact concerns are considered but these do not override the primary economic case. However, Ofgem is likely to ensure that positive community impacts are factored in as part of overall project risk and qualitative evaluation, including its influence on floor price setting.
• Projects with strong community benefits (e.g. job creation rather than relocation, local infrastructure improvements etc.) are likely to attract greater weighting in the CBA.

Approach to EIAs

Environmental impacts are usually assessed through EIAs, reports from statutory bodies such as the Environment Agency, the Scottish Environment Protection Agency, Natural England and NatureScot, and compliance with biodiversity net gain, carbon reduction and sustainable development policies.

Key assessment methods are likely to include the following:

• EIAs: Developers must provide data on, amongst many other things, biodiversity loss, air and water quality, and land use changes.
• Biodiversity Net Gain (BNG): Many projects must now demonstrate a BNG of at least 10% in England.
• Carbon reduction strategies: Projects are evaluated based on their carbon footprint relative to national net-zero goals.

The key issues likely to be considered by planning authorities are: habitat disruption, water use (especially for Pumped Storage Hydropower (PSH), emissions, and carbon savings; sensitivity of the site in relation to protected areas (e.g. National Parks, Sites of Special Scientific Interest); and climate impact improvements, particularly net-zero alignment.

Projects with significant environmental concerns may face additional scrutiny before achieving planning consent. As with community benefits, sustainability-positive innovations (e.g. low-impact PSH designs, restoration projects) may strengthen a project’s case during the CBA.

• Ofgem is likely to prioritise projects demonstrating strong alignment with net-zero and environmental goals.
• PSH projects will likely require hydrological assessments and be able to achieve Water Framework Directive compliance. If such assessments can demonstrate benefits like habitat restoration, species protections and flood prevention/mitigation, this should improve the likelihood of planning approval.

Approach to landscape impacts assessment

Bodies such as Natural England, Historic England, NatureScot, Historic Environment Scotland and LPAs assess the visual and cultural impact of large energy storage projects, particularly in sensitive areas such as National Parks and Areas of Outstanding Natural Beauty (AONBs). Impacts to landscape are usually assessed through national and local planning frameworks on landscape protection (e.g., National Parks, AONBs), mitigation reports submitted as part of planning applications and consultations with architectural, conservation and heritage bodies.

Key assessment methods are likely to include the following:

• Landscape and Visual Impact Assessments: Required when projects affect scenic views, cultural heritage or listed sites.
• National Planning Policy Framework compliance: Ensuring developments protect or enhance their surroundings.
• Land mitigation strategies: Tree planting, land reshaping and underground cabling are proposed where necessary.

The key issues likely to be considered by planning authorities are: the visual impact of energy infrastructure (particularly for large-scale PSH and above-ground components of compressed air energy storage); compatibility with local landscape policies; mitigating local opposition risks; and potential compensatory measures (e.g. habitat restoration, reforestation).

Projects that fail to incorporate landscape mitigations are unlikely to achieve planning consent and will therefore be ineligible for cap and floor support. As noted above, once a project has achieved planning consent, the potential for impact upon the CBA likely only arises where there is a positive benefit from the proposed development. For all LDES projects, credibly demonstrating a positive landscape impact may be exceptionally challenging (if not impossible).

How will Ofgem integrate these factors into the LDES cap and floor scheme application process?

Since these hard-to-monetise impacts will be assessed as part of existing planning and environmental permitting processes, Ofgem is expected to:

• reference existing planning and environmental authority decisions, rather than conducting new assessments;
• red-flag projects with significant unresolved issues, where refusal or delays are likely; and
• incorporate positive community, environmental and landscape factors as supplementary benefits where they enhance socio-economic welfare.

Future mandatory requirements?

The Department for Energy Security & Net Zero (DESNZ) is consulting on establishing a mandatory community benefits scheme across all large-scale low-carbon energy infrastructure in Great Britain. As currently envisaged, this would apply to all PSH schemes ≥ 5 MW in Great Britain with a view to ensuring local communities tangibly benefit via cash or in-kind funds, shared ownership, local infrastructure, training and/or environmental improvements. Consequently, it may become the case that any DESNZ scheme establishes the requirements for community benefits in the future and it plays less of a role in the CBA decision process for future applications.

Conclusion: a qualitative and risk-based role in cap and floor project evaluation

Whilst Ofgem will consider community, environmental and landscape impacts, these assessments will be qualitatively reviewed by Ofgem at the application stage and rely on external authorities’ expertise, ensuring that:

• regulatory duplication is avoided, reducing complexity for developers;
• LDES projects align with wider sustainability and planning policies, increasing public and governmental acceptability; and
• projects that provide clear environmental and community benefits gain additional positive weighting during the CBA process.

Ultimately, these factors will supplement the economic case for LDES projects and may affect project eligibility, ranking or level of support, rather than overriding the economic case within the cap and floor framework.