Zenobē Energy Challenges GEMA’s Long-Duration Storage Scheme

The notice of appeal, published on 14 November 2025, confirms that Zenobē filed its application with the Competition Appeal Tribunal (“CAT”) on 22 October 2025 under section 70 of the Subsidy Control Act 2022 (“SCA”), which allows an interested party to seek a review of a subsidy decision.

What Is Being Contested?

Zenobē argues that GEMA’s decision to establish the LDES scheme constitutes a “subsidy decision” within the meaning of the SCA and that, as such, it was not validly made in accordance with the provisions of the SCA. Zenobē is, among other things, asking the CAT to quash the decision.

GEMA is a non-ministerial government department established under the Utilities Act 2000 and is the independent regulator of gas and electricity markets in Great Britain. Its day-to-day functions are carried out by Ofgem (Office of Gas and Electricity Markets).

Zenobē (the applicant and interested party) owns and operates lithium-ion battery energy storage assets in the UK through subsidiaries, each of which either holds an electricity generation licence granted under the Electricity Act 1989 or operates under an exemption from the requirement to hold a licence.

Under section 70(1) of the SCA, an interested party who is aggrieved by the making of a subsidy decision may apply to the CAT for a review of the decision. An interested party is defined as a person whose interests may be affected by the giving of the subsidy or the making of the subsidy scheme.

The Scheme in Question

The LDES scheme, announced by GEMA in September 2025, uses a cap-and-floor mechanism to provide revenue certainty for developers.

This model guarantees a minimum income level (the floor) and limits excessive profits (the cap). It aims to unlock investment in technologies that can store electricity for extended periods, such as pumped hydro, compressed air, and advanced battery systems. These technologies are critical for balancing intermittent renewable generation and ensuring grid stability.

The government and GEMA argue that the LDES scheme will accelerate the UK’s transition to a low-carbon energy system by addressing a long-standing barrier: the lack of predictable revenue streams for storage projects. Zenobē contends that the scheme breaches the UK’s subsidy control rules and was not lawfully implemented.

The notice of appeal states that Zenobē’s application argues GEMA’s publication of a suite of documents on 23 September 2025 constituted its decision to make a “subsidy scheme” within the meaning of the SCA.

Legal Framework and Implications

The SCA replaced the EU State aid regime and transitional arrangements under the UK-EU Trade and Cooperation Agreement with a domestic system focused on UK competition. It sets out principles for lawful subsidies and provides mechanisms for review. Under section 70, reviews are conducted on judicial review principles, meaning the CAT examines whether the decision was made lawfully rather than reassessing its merits. If the CAT finds non-compliance, it can issue orders, including quashing the decision or requiring recovery of subsidies.

This case follows earlier challenges under the SCA, such as the CAT’s judgments in The Durham Company Limited v Durham County Council (Case No. 1577/12/13/23) and Weis v Greater Manchester Combined Authority (Case No. 1642/12/13/24), which have begun shaping the interpretation of subsidy control rules. Several other cases remain pending before the CAT:

• The New Lottery Company Ltd and Others v The Gambling Commission: Case No. 1730/12/13/25
• Bristol Airport v Welsh Ministers: Case No. 1740/12/13/25
• Mr Graham Thomas & Others v Durham County Council: Case No. 1751/5/7/25

Procedural Developments

On 3 November 2025, the CAT issued a reasoned order refusing Zenobē’s request to shorten GEMA’s time to file its defence and rejecting GEMA’s application for a stay. The CAT confirmed that standard timelines apply, and both applications were dismissed with costs reserved. This signals that while the case is urgent for the parties, the CAT will adhere to established procedural norms.

Net Zero

Although the dispute is legal in nature, its subject matter is highly relevant to the UK’s net zero ambitions. Long-duration energy storage is essential for integrating renewable energy into the grid, reducing reliance on fossil fuels, and ensuring system resilience. The LDES scheme was designed to address a critical investment gap in these technologies. The CAT’s decision could therefore influence the pace and structure of the UK’s clean energy transition.

Why This Matters

The outcome could set a significant precedent for how subsidy schemes are designed and implemented in the UK energy sector. If Zenobē succeeds, regulators may need to revisit the legal framework for future initiatives aimed at supporting clean energy technologies. This could influence investor confidence, particularly for developers of storage solutions that underpin decarbonisation.

For businesses in the energy sector, the case underscores the importance of understanding subsidy control compliance and the potential for legal challenges under the SCA. As the UK accelerates toward net zero, clarity on these rules will be critical for both public authorities and private enterprises.

For legal advice on subsidy control compliance and challenges, contact Stacey Gray, Commercial Senior Associate, in our Energy Team.