SSE pledges £100m investment boost to pumped hydro scheme in Scotland

Pictured: Loch Lochy. Image: SSE

The project, planned for the shores of Loch Lochy, would be capable of delivering 30GWh of long-duration energy storage, making it the UK’s largest pumped hydro project in more than four decades once completed. It would more than double Britain’s long-duration energy storage capacity.

SSE is aiming for the project to come online in 2031, subject to a final investment decision being reached in 2024.

SSE has this week pledged a £100m investment boost for the project, which is expected to require a total of £1.5bn of capital investment for construction. But it has warned that reaching the final investment decision will depend on the UK Government setting out how it intends to financially support the long-duration energy storage sector.

The Energy Security Strategy, published last April, committed the Government to providing these plans – but they have not been forthcoming, amid two consecutive changes in Prime Minister.

There have been some reports that Rishi Sunak may publish an updated Energy Security Strategy, accounting for his Government’s increased ambitions on energy efficiency and providing more details for sectors such as pumped hydro. In any case, it is legally required to update its ‘unlawful’ Net-Zero Strategy by the end of March.

The Scottish Government granted permission for Coire Glas in 2020 and is also considering a planning application from Drax for a major expansion of capacity at its Cruachan Power Station.

Scotland’s Cabinet Secretary for Energy and Net-Zero, Michael Matheson, said: “The Scottish Government has long been supportive of pumped hydro storage capacity, which we believe will play a key role in the energy transition and is a vital component of a more flexible, resilient and secure electricity supply.

“However it is critical that the UK Government puts in place the appropriate market and regulatory arrangements to support the industry’s development as a matter of urgency. Only with a supportive policy environment can this sector realise its full potential.”

SSE’s finance director Gregor Alexander added: “Whilst Coire Glas doesn’t need subsidy, it does require more certainty around its revenues and it is critically important the UK Government urgently confirms its intention on exactly how they will help facilitate the deployment of such projects.”

SSE is advocating for the UK Government’s ongoing Review of Energy Market Arrangements (REMA), badged as the biggest shake-up to energy market design in a generation, to conclude with new measures increasing revenues for low-carbon flexible energy assets.

The energy major also wants the Government to consider introducing a ‘revenue stabilisation mechanism’ in the form of an adapted Cap and Floor scheme to support investment in long-duration storage. The Government has stated that it is considering introducing such a mechanism in 2024. In a cap and floor mechanism, revenues or margins are subject to minimum and maximum levels. Below the ‘floor’ customers would top-up revenues, and earnings above the ‘cap’ would be returned in whole or in part to customers.