EXCLUSIVE: SSE keeps 600MW Highlands hydro project on ice as new report shows prospects for large-scale new UK pumped storage power plants are bleak

CGI of Coire Glas pumped storage hydro power plant - now put on ice by SSE.
CGI of Coire Glas pumped storage hydro power plant – now put on ice by SSE.

EXCLUSIVE by Scottish Energy News

Current market and regulatory conditions preclude the building of new large-scale pumped hydro power plants in the UK, according to an expert independent report published by DNV GL.

The report – funded by the Scottish Government, SSE, and Scottish Power – identifies the political and economic barriers facing “one of the most cost-effective options for grid-scale energy storage”.

The report – ‘The Benefits of Pumped Storage Hydro to the UK’ – is intended principally for policymakers, and looks to inform and create awareness about the relevance of pumped storage hydro for providing flexibility, the integration of large-scale deployments of renewables, and the development of sustainable, secure and cost-effective future low-carbon power systems.

It presents an in-depth coverage of the benefits of pumped storage hydro in the UK, and also addresses the multiple issues which could impede the full realisation of the benefits of this large-scale energy storage technology.

It concludes: “Despite the increased interest and research funding on bulk energy storage, actual deployment of this type of technology still remains low in most electricity markets with increasingly large shares of intermittent generation.

“And despite the evident need, and the capability of mature bulk energy storage, the economics and timing required to build these facilities are not being adequately addressed within modern electricity markets, including the UK.

“The UK –  and in particular Scotland – has suitable locations for large pumped storage hydro power assets.

“From technical and economic perspectives, pumped storage hydro power is likely to be among the best and most cost-effective ways of providing large amounts of reliable flexibility in the UK.

“The GB electricity system will require new sources of flexibility in order to cope with factors such as large-scale deployments of variable renewable generation, inflexible low-carbon generation (CCS and nuclear), and changes in electricity consumption (such as electric vehicles, and heat pumps).

“However, the vast majority of pumped storage hydro power schemes in the world have been constructed under some sort of Government-supported regime which has ensured long-term revenues and capital recovery.

“Liberalised markets do not appear to provide the required level of certainty of revenues for incentivising investment in large-scale hydro power.

“Commercial operators are well placed to manage commercial risks. However they are unable to manage, predict, or hedge risks associated with future policy decisions.

“If pumped storage hydro developers are to be expected to place large amounts of capital at risk to deliver long-term investment in storage assets, then it will be essential for Government and Regulators to provide a degree of commercial guarantee behind future policy direction.”

Mike Seaton, Director of Development at SSE, said: We’d like to see all parties working closely together to examine what steps can be taken to remove investment barriers which prevent new pumped storage projects being built.”

“It is clear from the report that pumped storage can and does play a significant role in making the UK’s electricity system more efficient, reliable and secure for the future.

“At a stroke, SSE’s consented Coire Glas project  would more than double the total amount of current pumped storage capacity in the UK.”

If built, Coire Glas would be the first new large scale pumped storage scheme to be developed in Britain for over 30 years with energy storage capacity of up to 30GWh,

The construction period of the project would take up to five years, with over 400 people employed at the peak of construction.

But an SSE spokesman added: “We secured consent to build the 600MW pumped storage hydro scheme called Coire Glas at Loch Lochy in the Highlands back in December 2013. Projects such as Coire Glas have the potential to deliver the benefits of storage on an, as yet, unrivalled scale.

“However, despite the obvious benefits that pumped storage offers, making a Final Investment Decision to progress the £800 million scheme remains on ice because we cannot see a way round the commercial and regulatory challenges. 

“Currently the market does not provide investors with necessary certainty to develop large scale energy storage capacity and future revenues are extremely uncertain.

Neil Clitheroe, Chief Executive, Scottish Power Generation Holdings, said: “Pumped storage hydro is the most cost effective form of large-scale electricity storage and can help us make the most of the green megawatts we already produce and thus meet global climate change targets.

“Scotland has the landscape and resource potential to deliver a new generation of pumped storage hydro projects.

“We do not need subsidy to invest in electricity storage, but we do need a Government policy that would support our investment, and we will continue to work with Holyrood and Westminster to find common ground.”

Scottish Energy Minister Paul Wheelhouse, said: “This report outlines the huge opportunity around pumped storage hydro. This tried and tested technology can support peak demand and effectively store greater levels of electricity at times when renewable energy output is high but demand is low.

“This part of the hydropower industry needs a supportive policy and market framework – such as a ‘cap and floor’ mechanism, as is used for interconnectors – and I call upon the UK Government to heed calls from the sector and work with the industry and Scottish Government to remove investment barriers that prevent new pumped storage hydro projects being built.”

The report: The Benefits of Pumped Storage Hydro to the UK,

 

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