REVENUE STACKING LEGAL FRAMEWORKS FOR STORAGE

1. Meaning of Revenue Stacking

Revenue stacking describes the ability of an electricity-storage facility to obtain income from several different electricity-market services using the same physical asset. A battery, pumped-storage plant or other storage facility may earn revenue from wholesale arbitrage, balancing services, capacity-market participation, network-support services, ancillary services and potentially long-duration storage support.

The legal difficulty is that each revenue stream may be governed by different licences, electricity codes, market rules, metering requirements and competition safeguards. Revenue stacking is therefore lawful only where participation in one service does not conflict with obligations arising from another.

2. Regulatory Status of Electricity Storage

In Great Britain, Ofgem regulates electricity storage largely through the electricity generation licensing framework. In 2020 it modified the generation licence to define “electricity storage” and “electricity storage facility” and introduced Standard Licence Condition E1 concerning storage information. The reform was intended to provide regulatory certainty and prevent inappropriate double charging of certain final-consumption levies.

Ofgem currently states that businesses generating or storing electricity may require an energy licence unless an applicable statutory exemption applies.

This classification is important because revenue stacking remains subject to generation-licence obligations and applicable industry codes.

3. Main Revenue Streams

A storage operator may potentially combine several sources of income.

Wholesale arbitrage involves charging when electricity prices are relatively low and discharging when prices rise.

Balancing and ancillary services allow storage to provide frequency response, reserve, system balancing and other flexibility services to NESO.

Capacity Market revenue may arise where eligible storage capacity participates successfully in Capacity Market arrangements and assumes corresponding availability obligations.

Storage may also provide distribution-network flexibility, congestion management or other network services under appropriate procurement arrangements.

However, double recovery may be restricted where two payment mechanisms remunerate substantially the same service or where scheme rules prohibit overlapping support.

4. Long-Duration Electricity Storage

Revenue stacking has acquired additional significance under the emerging Long Duration Electricity Storage (LDES) cap-and-floor regime.

Under Ofgem's framework, qualifying projects receive a revenue floor protecting them against revenues falling below a specified level, while revenues above the cap are returned for consumer benefit through network-charge reductions.

As of September 2026, Ofgem is developing special licence conditions for the first LDES investment window. The regime therefore combines market-derived revenues with regulated revenue protection rather than replacing normal commercial activity entirely.

5. Co-Location and Metering

Revenue stacking becomes more complicated where storage is co-located with renewable generation or final consumption.

Standard Licence Condition E1 requires relevant storage licensees to provide information concerning technology, capacity, network connection, co-location relationships and metering arrangements.

Accurate metering is essential because regulators must distinguish electricity imported for charging, exported following storage, consumed on-site or generated by another co-located asset. These distinctions affect network charges, levies and eligibility for particular revenue schemes.

6. Market Conduct and Competition Limits

Revenue maximisation remains constrained by market-conduct rules. Storage operators cannot structure bidding, dispatch or re-trading strategies in ways that breach licence conditions or distort electricity markets.

Ofgem's June 2026 policy on repetitive re-trading by storage during transmission constraints specifically addresses the interaction between storage trading strategies and the Transmission Constraint Licence Condition.

Therefore, revenue stacking does not create an unrestricted entitlement to monetise every technically available opportunity.

7. Case Law

R (Peak Gen Top Co Ltd) v Gas and Electricity Markets Authority [2018] EWHC 1583 (Admin)

Facts: Small embedded generators challenged Ofgem's decision reducing benefits arising from electricity transmission charging arrangements.

Legal Issue: Whether Ofgem's restructuring of charging advantages was unlawful or discriminatory.

Judgment: The High Court dismissed the judicial-review challenge.

Legal Principle/Ratio: Ofgem has broad discretion when addressing technically complex charging structures where decisions are evidence-based, rational and within statutory powers.

Significance: Storage operators cannot assume that existing revenue streams or charging advantages will remain permanently protected where regulators identify market distortions.

R (SSE Generation Ltd) v Competition and Markets Authority [2022] EWCA Civ 1472

Facts: The litigation concerned electricity transmission charging methodology and GEMA's attempt to move an existing regime toward legal compliance.

Legal Issue: How far a regulator may alter complex charging arrangements while complying with governing law.

Judgment: The Court of Appeal recognised significant regulatory discretion concerning transitional implementation.

Legal Principle/Ratio: Complex commercial charging frameworks remain subordinate to statutory and regulatory legality.

Significance: Revenue-stacking business models must account for regulatory change, code modification and lawful reallocation of network costs.

8. Conclusion

Revenue stacking enables storage projects to combine wholesale, balancing, capacity, network and regulated revenues, improving project economics and system flexibility. Its legal sustainability depends upon licensing, metering, electricity codes, scheme-specific eligibility rules, competition law and anti-double-recovery principles. Storage operators therefore require both commercial optimisation and continuous regulatory compliance when combining multiple revenue streams.