Pumped Storage Hydro in the UK - new policy is needed to encourage and de-risk new investment.
Introduction
Pumped Storage Hydro projects are great projects – however they do have several barriers to overcome
·???????? Site and Geological Constraints: Pumped Storage Hydro (PSH) projects are typically location-dependent, meaning they are built where the geological conditions are suitable, limiting flexibility in site selection.
·???????? Remote Locations: These sites are often in remote areas where infrastructure development is challenging, with issues related to access, logistics, and the availability of a skilled local workforce.
·???????? Environmental Concerns: Building in these remote areas can quickly draw opposition from local communities and environmental groups due to potential impacts on wildlife, ecosystems, and the environment.
·???????? Lengthy Approvals Process: The long planning, consent, and approval processes for new PSH projects create uncertainty, which can deter private investors who may not wish to engage in lengthy and complex regulatory hurdles.
·???????? High Upfront Costs and Delayed Returns: PSH projects require significant capital investment and have long construction periods, meaning investors may not see returns for many years. Our data indicates that 9 out of 10 PSH projects experience schedule overruns.
·???????? Industry Learning Curve: Since the UK has not built a PSH facility since 1984, the industry and supply chain will face a new learning curve, despite the technology itself not being novel or "first of a kind" (FOAK) for the UK.
·???????? UK’s Competitiveness for PSH Projects: Companies interested to build PSH or invest in such assets may be drawn to countries with financial incentives and existing legal frameworks.? For example, the Spanish Ministry for the Ecological Transition and the Demographic Challenge (MITECO)?has granted €100m to four innovative energy storage projects through reversible pumped hydroelectric plants.[1]
PSH role in NetZero
PSH can play a key role in helping the new UK Government to meet its NetZero targets and deliver its key green energy policies.
In Labour’s “Make Britain a Clean Energy Superpower” manifesto, it sets out the Labour Party’s ambition to accelerate towards NetZero by 2030 with the vision that,
“By 2030, the UK will be the first major country in the world to run on 100 per cent clean and cheap power, with lower bills for all” [i]
And although their “Make Britain a Clean Energy Superpower “[2] talks to the need to invest in Long Term Energy Storage, from my desktop research (please feel free to correct me) both this document and the new Labour Government has not provided any “bat signals” (superhero to their superpower) or intentions for PSH.
However, encouraging for not just PSH but for all renewable energy, their document does talk to the need to accelerate consenting decisions for new renewable projects,
“Labour will introduce tough new targets for consenting decisions for renewable projects, with a new framework to monitor decision times and a designated directorate within government to ensure departments and statutory consultees remain on track. We will guarantee that decisions don’t languish on the Secretary of State’s desk for months and even years, as they have under the Tories”
But speeding up infrastructure delivery is a hard nut to crack, partly because we are a democratic and fair bunch, and we believe people should have a voice and a say. I have seen a number of Government initiatives try to do this with little result
Perhaps this Labour Government can use some of its political capital to make a step change in the infrastructure delivery system and machinery.?
Lastly, before I move on to some opportunities, alongside Labour flexing its political capital, it may also need to encourage investment capital for PSH through new incentives and mechanisms.
In the “Make Britain a Clean Energy Superpower” there is a suggestion that Labour is thinking of investment in Long Energy Duration Storage:
“Invest in carbon capture and storage, hydrogen, and long-term energy storage to ensure that there is sufficient zero emission back-up power and storage for extended periods without wind or sun, while maintaining a strategic reserve of backup gas power stations to guarantee security of supply.”
What this investment or financial support looks like is less clear. In Jan 2024, DESNZ (under the previous government) published (after their call for evidence on the topic) a
“Long duration electricity storage consultation Designing a policy framework to enable investment in long duration electricity storage.” [3]
And DESNZ is keen to consult on their intention to develop a Cap and Floor scheme that aims to overcome the barriers for investing and building Long Duration Electricity Storage (LDES)
What is a Cap and Floor Financing Model:
The goal of this model is to stimulate investment in LDES by reducing risks for developers and attracting both private and institutional capital, enabling the acceleration of storage capacity deployment.
Would this be the preferred approach under a new Government? As other options exist such as Regulatory Asset Base Models (used for new Nuclear) are also potentially available.?
The UK Infrastructure Bank (UKIB) may also play a role in encouraging new private PSH investment – distilling from a blog
“….the Bank is building internal capabilities to invest directly in a wider range of storage projects in the future. This includes bridging financing gaps for large-scale lithium-ion projects and fostering market development for longer-duration technologies.”[4]
Previously the UKIB has provided directed and targeted support for Carbon Capture [5] and perhaps a similar approach for encouraging PSH/Long Duration Electricity Storage may also follow.
Across the pond, (they do it to us) the US is encouraging investors of PSH through the Inflation Reduction Act.
The Inflation Reduction Act (IRA) offers Investment Tax Credits (ITCs) that significantly support the development of pumped storage hydropower (PSH) in the U.S. By providing tax credits of up to 30%, the IRA lowers the capital costs and financial risk for PSH projects, which are typically expensive and have long timelines. This makes PSH a more attractive investment for developers, enabling projects that might have previously been economically unfeasible. Additionally, PSH projects may qualify for bonus credits if they meet specific criteria, such as using domestically produced materials, being located in former fossil fuel sites, or adhering to labour standards, further enhancing financial returns and incentivising targeted development.
Bringing it back to the UK, what is clear is that there is a role for the UK government to help de-risk the large upfront investment for LDES.
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Opportunities
(1) The role of Scotland (Not being bias because my name is Scottish name).
Scotland is absolutely bossing it when it comes to renewable energy. It is home to the largest wind farm is in Scotland.
As of the end of March 2024, there is 15.4 GW of operational capacity for renewable electricity generation in Scotland. This has increased from 4.4 GW capacity in 2010 with most of the growth in onshore wind energy.
Figure 1: Renewable Electricity capacity (March 2024)[6]
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And the potential pipeline of project is really exciting? As of the end of March 2024, there are 790 potential renewable energy projects, with a total estimated capacity of 46.8 GW, in the planning and construction pipeline: ?284 projects with an estimated capacity of 24.8 GW are at the planning stage; 434 projects with an estimated capacity of 17.7 GW are awaiting construction and 72 projects with an estimated capacity of 4.2 GW are currently under construction.
Figure 2: ?Renewable electricity pipeline capacity by planning stage and technology (March 2024)
A significant number of proposed PSH projects are located in Scotland, already a major generator and exporter of renewable energy. With these new projects, Scotland could also become the leading importer, "balancer," and storer of green energy. The combination of Scottish wind powering long-duration electricity storage presents a compelling narrative for both Net Zero goals and political strategy. It’s also fitting that Scotland has been chosen as the HQ for Great British Energy, reflecting this ambition and its central role in the UK's clean energy future.
?(2) Refurbishment and expanded existing assets.
Another opportunity in mitigating some of the barriers listed above is expanding and refurbishing the UK's existing and aging pumped storage hydro assets. A prime example is Switzerland's Linth-Limmern Hydro Storage Plant, which underwent an upgrade in 2017. The project added four new 250 MW units, increasing the complex's generation capacity from 520 MW to 1,520 MW. Their generating units are also variable speed systems instead of the traditional fixed speed which optimise plant efficiency and facilitating energy storage when power levels on the network are low. ?Upgrades are ?already happening with the expansion of the Cruachan PSH, where Drax is adding additional 600MW to the existing 440MW.
Our data also indicates that the P50 construction duration for expanding existing sites is 1.5 years shorter than building entirely new PSH. This not only allows for faster construction and earlier operation but also typically results in a quicker development phase—such as design and planning—particularly when simply replacing or refurbishing existing infrastructure.
Summary
Pumped Storage Hydro projects are key to help the UK meet its ambition in
“By 2030, the UK will be the first major country in the world to run on 100 per cent clean and cheap power, with lower bills for all”
But that’s only 6 years away, well 5 in the next few months. There is a pressing need for this Government to set-out its response to the DESNZ consultation, and plan new policy on how it will encourage the private sector to invest in LDES and the role of PSH in its green energy jigsaw. Expanded existing, while building new, (through accelerated approval frameworks, and new investment mechanisms) concurrently is key.
We have a great international dataset on PSH if you would like find out more then please feel free to reach out.
[6] https://www.gov.scot/publications/renewables-and-wind-power-update-to-scottish-affairs-committee/
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Scientist at Scotland
3 周These Pumped Storage Hydro schemes proposed to serve the UK grid could increase existing PSH energy storage capacity in Scotland from 13GWh by a factor of 600+ to 8000+GWh. https://scottishscientist.wordpress.com/2023/02/05/map-of-pumped-hydro-schemes-in-scotland/
Independent Oil & Energy Professional
1 个月What is the efficiency of PSH?