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Publications / Blogs

Why new policy mechanisms are needed to ensure the success of Cruachan

This blog was provided by Drax, a member of Energy UK.

The rollout of renewable technologies such as wind and solar is to be commended and is a critical part of decarbonising the UK’s power sector. However, a lack of energy storage capacity on the electricity system has meant that there are an increasing number of periods where wind farms are being paid to turn down output during periods of high wind and/or low generation, and high carbon back-up generation is being used during periods of low wind and/or high demand. Addressing this will be a crucial part of ensuring that the UK can operate a net zero power system by 2035.

A study by the consultancy LCP for Drax found that, across 2020 and 2021, the costs of managing wind constraints reached £806m as not enough electricity storage was available to prevent the excess renewable power from wind farms going to waste. As the amount of wind on the electricity system increases, these costs will continue to rise unless technologies are in place to better manage these constraints.

Pumped storage hydro, as the most prevalent large-scale, long-duration electricity storage (LLES) technology presents one of the best options to mitigate the level and cost of curtailing generation and reducing the need for high carbon back up generation. Based in Scotland, the Cruachan Pumped Storage Hydro station, affectionately known as the ‘Hollow Mountain’, has been used to store excess electricity and provide this power back to the grid in times of high demand since its construction in the 1960’s.

Drax plans to invest at least £500m to construct a new underground power station at Cruachan in Scotland. The project involves the construction of a new underground power station next to the existing Cruachan site. This power station would host new generation units (600MW taking the total site capacity to over 1GW), significantly increasing the sites’ ability to absorb excess renewable electricity from the grid and provide this power back to the grid in times of high demand and/or low generation.

Almost forty years have passed since the last pumped storage hydro plant was built in the UK, because we haven’t had the right policies or investment frameworks from government to support the long-term nature of these developments, high up-front capital costs and a lack of revenue certainty.

Pumped storage hydro projects will participate and compete in a number of different markets including the wholesale market, balancing market, ancillary services markets, and the capacity market. At present, the revenues received across these markets can be highly variable and are very difficult, if not impossible, to forecast. To enable investment, the government will need to introduce a policy mechanism to mitigate the risk of revenue uncertainty. Progress is being made on this front, in 2022 the UK government committed to introduce policies to support the deployment of LLES technologies by 2024. Given the importance of these technologies and their long construction periods, the government must ensure that it meets this deadline and provides clear routes for projects such as the Cruachan expansion to deploy in order to support the decarbonisation efforts being made across the entire sector.