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The UK/Ireland Nuclear Free Local Authorities have joined the First Minister of Scotland, Scottish Renewables, and the British Hydropower Association in calling for the urgent introduction of a UK Government financial package to support the development of more long-term electricity storage facilities.
The NFLAs particularly want to see financial backing for ‘pumped storage hydro’ (PSH) schemes in Scotland. PSH works by utilising electricity at times of surplus generation to pump water uphill and behind a dam. When there is a shortfall in electricity generation, this water is allowed to flow back downhill through tunnels driving the blades of turbines which in turn generate electricity for supply back to the grid; in effect such schemes represent an energy bank. PSH is not a new technology; there have been plants in the UK since the 1960’s, but the first one was built in Switzerland in 1907 and this continues to operate.
The government has indicated it wants to introduce a financial package for PSH in 2024, but the NFLAs believe that this will be too late and that the time to do so is now. Six ‘shovel ready’ PSH projects are waiting to begin, but commercial operators need some guarantee of their future income to make their investment worthwhile.
Now the NFLAs have written to the Energy Ministers, Grant Shapps and Andrew Bowie, asking them to ‘speak out to introduce more alacrity to the process of bringing in an investment mechanism’.
The NFLA Scotland Forum has recently published a related briefing titled ‘Scotland, the UK and Storage’. This can be sourced via this link https://www.nuclearpolicy.info/briefings/nfla-policy-briefing-269-scotland-the-uk-and-energy-storage/
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For more information, please contact NFLA Secretary, Richard Outram by email to richard.outram@manchester.gov.uk or telephone 07583 097793
Notes to Editors:
Letter of the NFLAs to ministers:
The Rt. Hon. Grant Shapps MP,
Secretary of State for Energy Security and Net Zero
Cc The Rt. Hon. Andrew Bowie MP,
Minister for Nuclear and Networks
24 July 2023
Dear Secretary of State (and Minister),
The UK / Ireland Nuclear Free Local Authorities wish to lend their support to the calls made recently to the Prime Minister by Scottish First Minister Hamza Yousef in a letter dated 22 May and by Claire Mack, Chief Executive, Scottish Renewables and Kate Gilmartin, CEO, British Hydropower Association in a letter dated 13 July seeking the accelerated delivery of an investment mechanism to support the deployment of large-scale, long-duration electricity storage (LLES), most especially relating to the six ‘shovel ready’ pumped-storage hydro (PSH) schemes in Scotland.
These letters are attached as Appendices 1 and 2. As these clearly set out the case, I shall confine myself to a few addition comments for brevity:
- The National Grid’s own Future Energy Scenarios are predicated upon 50 GW of storage capacity by 2050 to achieve net zero and Aurora has recently published a study suggesting 46 GW by 2035.
- Although a lot of capacity will be in the form of short-term storage in batteries, the development of greater large-scale, long-duration electricity will be a vital component in the efficient managed delivery of a net zero British electricity network.
- PSH is a proven form of LLES. It is most unfortunate that your Scottish Office colleague John Lamont MP recently referred to PSH as a ‘new technology’ as we have had such facilities in the UK since the 1960’s, and indeed the world’s first plant came online at Engeweiher in Switzerland in 1907 and is expected to remain operational until 2052!
- A report from BiGGAR Economics, commissioned by Scottish Renewables, identified six ‘shovel-ready’ pumped-hydro projects in Scotland which could deliver £5.8 billion Gross Value Added (GVA) and almost 15,000 jobs by 2035. These 6 projects could increase GB PSH storage volume from the current 26.6GWh to 122.5GWh by 2035. Scottish Renewables says there is currently 6.85GW of planned PSH projects with over 135GWh of storage capacity.
- Further to this, SSE Renewables has unveiled plans to convert its 152.5MW Sloy Power Station in Argyll into a new PSH facility. This would deliver up to 25GWh of long-duration electricity storage capacity bringing the total new storage capacity to 5GW and volume to 120.8GWh
Secretary of State (and Minister) it is simply too long to wait until 2024 when the government says it shall be introducing a new investment mechanism to support LLES; the time to do so is now.
Failure to do so could mean that the significant private sector interest and investment in this market could evaporate in the interim and it shall certainly mean the continuation of current practice where wind farm operators are paid astronomical sums of money to turn off their turbines because there is no means to store the excess electricity that is produced.
The current cost of these ‘transmission constraints fees’ amounted to £1.3 billion in 2022 and this will rise still further as wind generation capacity increases. This is £1.3 billion wasted on pay offs that would be unnecessary if we had more storage capacity, it could be money be redirected to investments in home insulation or in renewables to achieve net zero more quickly.
If, as a Minister, you can speak out to introduce more alacrity to the process of bringing in an investment mechanism, we in the NFLAs would urge you to do so.
We would welcome your comments in response to this letter. Please reply by email to NFLA Secretary richard.outram@manchester.gov.uk
Thank you. Yours sincerely,
Councillor Lawrence O’Neill,
Chair, UK / Ireland NFLA Steering Committee
Appendix 1 – Letter from Scottish First Minister to the Prime Minister 22 May:
Dear Rishi,
Call for UK Government to support pumped hydro storage through a market mechanism
To tackle the climate emergency, we need to rapidly and fully decarbonise our electricity system. We fully support the UK Government’s ambition for decarbonised electricity by 2035. I am pleased that our governments are already working together to accelerate the net zero energy transition. But we know there is more to do.
As you know, Scotland is a global leader in the deployment of renewables, and as we expand deployment both onshore and offshore, Scotland’s renewable resources will play an increasingly important role in the transition to a net zero GB electricity system.
While additional deployment of renewables will play an important role in lessening dependence on fossil fuels for electricity generation, large-scale, long-duration energy storage is also absolutely critical to achieving our collective goals. It can help to integrate and maximise our significant renewable electricity generating capacity, ensure security of supply and manage constraints across the grid.
With this in mind, I am calling on the UK Government to support the development of long duration energy storage (including pumped hydro storage) through an appropriate market support mechanism.
Industry representatives have been clear that in order for long duration energy storage solutions to progress they require a cap-and-floor mechanism that ensures a minimum level of revenue. With an appropriate market support mechanism, several pumped hydro storage projects across Scotland, that have already secured planning permission, could begin construction immediately. This would provide vital resilience and flexibility as thermal generation starts to retire.
Pumped hydro storage is currently the only major renewable electricity technology ineligible for UK Government support. UK Government inaction on this issue represents a significant obstacle to deployment, and risks failing to secure the economic benefits of pumped hydro storage projects.
A UK Government consultation in 2022 identified pumped hydro storage as the most well-established large-scale, long-duration electricity storage technology in the UK. It also committed to develop appropriate policy to support investment and ensure the deployment of sufficient large-scale, long-duration energy storage to balance the overall electricity system by 2024.
I am concerned that slow action in this area is dampening investor confidence and preventing projects that are essential to the joint goals of our governments from coming forward.
You will also be aware that planning and consenting timescales are raised by industry as barriers to rapid deployment. Work by the UK Networks Champion, Nick Winser, and others is already providing insight into how timescales can be accelerated. One key barrier is the Scottish Government’s lack of devolved powers to reform the consenting regime in Scotland for grid projects and large scale electricity generation, the framework for which is set out in the UK Electricity Act – and which neither the Scottish Parliament or Scottish Ministers can amend. As you know, the Act dates from 1989 and its provisions on these matters are sorely outdated. The Scottish Government has proposed solutions to the UK Government that would enable changes required, and we continue to call on the UK Government to urgently find a legislative solution to accelerate the consenting process.
Whilst we believe legislative change is essential, we are also doing everything in our power under the existing regime to accelerate consenting processes in Scotland. We are continuing to review the current framework, and are considering options and engaging with key stakeholders to streamline our processes and make efficiencies in existing consenting processes.
I would be grateful to hear from you on how the UK Government plans to accelerate progress on these important issues.
Humza Yousaf
First Minister of Scotland
Appendix 2 – Letter from Scottish Renewables and British Hydropower Association 13 July:
RE: Accelerated delivery of an investment mechanism for Large-Scale, Long-Duration Electricity Storage
Dear Prime Minister,
As representatives of all major developers of Pumped Storage Hydro (PSH) in the UK, we are writing on the need for the accelerated delivery of an investment mechanism to support the deployment of large-scale, long-duration electricity storage (LLES) which would reduce consumer bills, greenhouse gas emissions and our reliance on imported fossil fuels.
As increasing amounts of variable renewable generation are added to the GB energy system, the need to bring forward electricity storage, in particular long-duration storage such as PSH, is becoming critically important.
The 2021 BEIS Smart Systems and Flexibility Plan stated that long-duration storage is “essential for achieving net zero” and a report last year by Aurora Energy Research showed that up to 24GW of long-duration storage, an eight-fold increase, is needed to cost-effectively meet the government’s 2035 decarbonisation commitment.
Additionally, a recent Scottish Renewables report found that six PSH projects currently under development could deliver £5.8 billion GVA and almost 15,000 jobs by 2035.
However, despite these projects promising to deliver energy security, savings to consumers and huge economic benefits across GB, no new PSH capacity has been constructed in over 40 years because of a lack of sufficient policy support.
There is currently 6.85GW of planned PSH projects with over 135GWh of storage capacity. If built, these projects would quintuple the total current electricity storage volume in GB. However, while the development of these projects is rapidly progressing, developers await the Government’s decision and implementation of a suitable revenue stabilisation mechanism before a commitment to construct such projects can be made.
The large capital costs, long lead times and highly uncertain revenue streams require a mechanism that ensures a minimum level of return can be achieved, most likely via an adapted ‘Cap and Floor’.
The government’s current commitment is for appropriate policy to enable investment at some point in 2024.
However, the BEIS committee in their recent report, ‘Decarbonising the Power Sector’, recommended that this is brought forward to 2023. Scottish Renewables and the British Hydropower Association strongly support this recommendation and urge the government to deliver an investment mechanism for LLES in the shortest possible timeframe with a minded-to consultation published this summer.
Ultimately, it will be consumers who bear the cost of any delay so we would therefore highlight the following factors that an accelerated delivery would help to address:
- Reducing system costs: The failure of investment in grid infrastructure to keep pace with renewables deployment is leading to significant increases in network congestion. This has contributed to annual constraint costs reaching £1.94 billion in 2022 according to the National Audit Office. PSH can mitigate these costs by allowing for greater use of generation in constrained areas as well as reducing the need for costly grid reinforcement. If deployed, PSH could deliver system cost savings of up to £680m per year in 2050.
- Energy Security: The recent energy price crisis demonstrated that the transition to clean, home-grown renewable energy is the only sustainable pathway to ending GB consumers’ exposure to volatile fossil fuel prices. PSH is a tried and tested technology that can deliver energy security by storing energy for when it is most needed, mitigating the variability of renewable generation.
- Investor flight: Global competition for investment, in particular the USA’s Inflation Reduction Act and the EU’s ‘Green Deal Industrial Plan’, planning and consenting delays and unfavourable taxation via business rates are leading to the UK becoming less favourable as an investment destination. The cost of capital will be the primary factor determining the cost to consumers so protecting access to low-cost financing should be a key driver in bringing forward the decision to implement an investment mechanism. There is a pipeline of consented, ‘shovel ready’ PSH projects that can begin construction soon after the delivery of an appropriately designed Cap and Floor. The lack of a mechanism is therefore the only barrier to unlocking the huge benefits these projects can deliver for consumers and the wider economy. However, once delivered, with operational lifetimes of over 100 years these assets will continue to provide these benefits for many generations to come.
We would welcome the opportunity to discuss this further with you and your team at your earliest convenience.
Yours sincerely,
Claire Mack, Chief Executive, Scottish Renewables
Kate Gilmartin, CEO, British Hydropower Association
