The government should consider options to support the market for pumped storage hydro to provide the long-term confidence required by investors.
The recommendation came in a new report by DNV GL, commissioned by Scottish Renewables, into the benefits of pumped storage hydro (PSH) to the UK. The report found that the pumped hydro storage schemes provide the following benefits:
- System operation: PSH can provide a wide range of ancillary services needed for system operability in the future low-carbon world, with capabilities similar to or better than thermal generation and other energy storage technologies (e.g. frequency response, reserve, voltage management, black start).
- Congestion costs: PSH can alleviate network congestion costs by storing excess generation in constrained zones for later use, thereby avoiding or deferring investment in network reinforcement.
- Environmental benefits: PSH avoids waste of low carbon electricity production during periods of low electricity demand, and avoids the environmental impact of new transmission infrastructure.
- Security of supply: PSH is the most economical storage technology for the long discharge periods required to contribute to security of supply.
The report found that globally less than 5% of existing PSH capacity has been built under liberalised market conditions, due to a mismatch between short contract periods in electricity markets and the long payback period to cover the high up-front costs. To combat this, the authors recommended that the government consider market mechanisms that recognise the long-term nature of the benefits of storage and place a value on all of the services which storage can provide. The report noted that the government had introduced a cap and floor support mechanism for interconnector projects, which face many of the same financing challenges as pumped storage hydro.
Read more: The Benefits of Pumped Storage Hydro to the UK.
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