UK energy company SSE has joined calls for the government to change its pricing regime for “pumped storage” hydro power stations, saying a new approach could unlock hundreds of millions of pounds of investment and support use of renewables. The unusual intervention by SSE, which is generally reluctant to take public positions on potentially controversial policy issues, will increase pressure on regulators to take another look at pumped storage. Such schemes use cheap or excess power from the grid to pump water into raised reservoirs, from where it can be released to generate electricity when needed. SSE has planning permission for an £800m pumped storage scheme at Coire Glas in the Scottish Highlands, but has not proceeded with it because of concerns about the high upfront costs and uncertain long-term returns. Oliver McMillen, head of public affairs at SSE, said the Perth-based company expected that the adoption of a “cap and floor” pricing regime would work for pumped storage. Under cap and floor, utilities are guaranteed a minimum price for output but a maximum price is also set, limiting the potential cost to consumers. Cap and floor pricing is already used for “interconnectors” that link the UK to overseas grids and which, like pumped storage plants, can smooth out power surpluses and shortages. “It is currently there for interconnectors. We’re suggesting widening it out to different technologies which can provide bulk flexibility,” Mr McMillen said. Details would have to be worked out, but “in principle” a cap and floor approach could open the way for SSE to go ahead with its Coire Glas project, he said. Coire Glas would allow storage of enough water to provide 30GWh of electricity to the grid, more than doubling the total volume of current pumped storage capacity in the UK. ScottishPower, the other big Scotland-based utility, has already called for the UK to consider cap and floor pricing for pumped storage, saying it would open the way for it to start work on a £400m plan to expand capacity at its existing plant at Cruachan.
FT 5th Dec 2016 read more »