British Hydropower Association (BHA) and Scottish Renewables are leading calls for a “cap and floor” mechanism for hydropower energy to accelerate investment.
The UK has a pipeline of more than 9GW including several “shovel ready” projects, but inaction has been costing consumers, stated the associations.
The pair have written a joint letter to the Secretary of State for Energy Security and Net Zero Ed Miliband, Secretary of State for Scotland Ian Murray and Secretary of State for Wales Jo Stevens, urging the UK government to support the deployment of long-duration electricity storage (LDES), including pumped storage hydro (PSH).
In the letter, which is co-signed by all major developers of PSH in the UK, the trade bodies called on London to urgently introduce a “cap and floor mechanism” for LDES to enable the delivery of the PSH pipeline which currently stands at more than 9GW of capacity, including several shovel ready projects.
The “cap and floor” is designed to unlock investment by striking a balance between commercial incentives and appropriate risk mitigation for project developers.
The “floor” provides a minimum revenue certainty for investors, with a regulated limit, or a ‘cap’ on revenues to avoid excessive returns to developers.
With the delivery of a LDES “cap and floor” mechanism, PSH can play a key role in supporting the UK government’s net zero targets and helping secure Britain’s clean energy future.
PSH is essential for storing energy from variable renewable sources like wind and solar, ensuring power availability when demand is highest.
The industry is urging London to publish its response to the 2024 LDES consultation by August, confirming the decision to develop a cap and floor mechanism and commit to establishing a policy framework by the end of 2024, with a consultation on the scheme’s detailed design in early autumn.
The industry has also called on the government to commit to opening the first application window for LDES technologies in early 2025 at the latest.
Chief executive of the British Hydropower Association Kate Gilmartin said: “With economic growth and renewable energy at the centre of the new government’s agenda, there is an opportunity to demonstrate a step-change in decision-making after years of delay and uncertainty.
“By prioritising the urgent delivery of a cap and floor mechanism, we can send positive signals to international investors and trigger large-scale capital projects and job creation.”
Scottish Renewables’ report ‘The Economic Impact of Pumped Storage Hydro’, indicates that six PSH projects under development could deliver £5.8bn in Gross Value Added (GVA) and create nearly 15,000 jobs by 2035.
Additionally, a Department for Energy Security and Net Zero analysis estimates system savings of up to £24bn from deploying up to 20GW of long duration electricity storage.