Essential electricity storage infrastructure that can cut energy bills by stabilising the power grid and enable more renewable power to come online isn’t being built because there isn’t an appropriate investment mechanism, according to a new report by KPMG.
The report, commissioned by Drax Group, looked at different revenue stabilisation mechanisms that could be deployed to unlock private investment in storage technologies.
No new long duration storage infrastructure, such as pumped hydro storage power stations, has been built in the UK for more than 30 years, the report said.
It found that an existing mechanism could be part of the solution to attract a wave of new investment in large-scale electricity storage infrastructure projects.
The report said that a cap and floor mechanism, such as the regime used to incentivise investment in cross-border interconnectors, is the standout solution to overcome the hurdles currently blocking investment in long duration storage technologies.
This model would reduce risks for investors while at the same time encouraging operators of the new storage facilities to respond to system needs, helping the Electricity System Operator to maintain secure supplies on an increasingly volatile grid, it added.
Drax Group Generation director Penny Small said: “The UK has decarbonised its electricity system at a faster rate than any other country as a result of the successful deployment of renewables including wind, solar, hydro and sustainable biomass.
“With more long-duration storage, the system would operate more effectively in terms of reducing emissions, cutting costs and maintaining secure supplies.
“This report sets out a clear pathway to unlock private investment in a new generation of pumped hydro power stations in the UK, and which also gives value for money for consumers.
“Innovative technologies like pumped storage hydro are key to achieving the UK’s net zero target, because they help stop excess renewable power from wind farms going to waste by storing it and making it available at lightning speed when the country needs it.”
Drax is moving forward with plans to build a new underground pumped storage hydro plant at its existing Cruachan facility in Argyll, Scotland.
The new 600MW station would be built within a new, hollowed-out cavern, and would bring the site’s total generating capacity to 1.04GW.