Potential solution to unlock investment in electricity storage technologies

Energy Storage

Essential electricity storage infrastructure that can cut energy bills by stabilising the power grid and enable more renewable power to come online is not being built because of a lack of appropriate investment mechanisms, according to a new report. 

The report by KPMG, commissioned by Drax Group, has looked at different revenue stabilisation mechanisms which could be deployed to unlock private investment in these vital storage technologies. 

No new long-duration storage infrastructure, such as pumped hydro storage power stations, have been built in the UK for more than 30 years. However, KPMG’s analysis has 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. 

Possible solutions were assessed through a rigorous framework to find which stabilisation regime would not only incentivise investment but would also address system needs and provide the best value for money for consumers. 

The report found that a cap and floor mechanism, like 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. 

Penny Small, Drax Group generation director, 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 hydropower 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 ambitious 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 that would be large enough to fit Big Ben on its side. 

Supporting around 900 jobs during its construction, the new facility would bring the site’s total generating capacity to 1.04GW – enough to power more than a million homes – capacity which could be available by 2030 with a suitable investment framework. 

Developments such as Cruachan 2 are critical to realising the UK’s climate targets. In 2020 enough wind power to supply a million homes went to waste in the UK because there wasn’t enough capacity to store this excess renewable power. 

There are many prospective long-duration energy storage projects in the UK, but none have shovels in the ground as businesses require more certainty from the government before giving the green light to development. 

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