Detailed roadmap on cap and floor' mechanism urgently required to boost investor confidence in Long Duration Energy Storage (LDES) and vital Pumped Storage Hydropower projects, says BHA
The British Hydropower Association has today (Oct 22) called on the UK Government and Ofgem to provide greater clarity and certainty on the timelines for implementing a proposed scheme to encourage investment to bring forward new pumped storage hydropower (PSH).
Last week, the government announced its commitment to introducing a cap and floor' mechanism for Long Duration Energy Storage (LDES) technologies.
The new scheme which will create vital investment in renewable energy storage, including pumped storage hydropower (PSH) schemes. The floor' provides a minimum revenue certainty for investors, with a regulated limit, or a cap' on revenues to avoid excessive returns to developers. It's similar to a scheme which has successfully brought interconnectors, another key technology that will enable flexibility and resilience with the UKs grid infrastructure.
While welcoming a cap and floor mechanism to support LDES deployment, industry leaders have stressed the urgent need for a detailed roadmap to ensure investor confidence and accelerate project development.
Kate Gilmartin, CEO of the British Hydropower Association, said: "While we appreciate the progress made so far, the LDES industry needs a very clear and detailed timeline to plan effectively. Uncertainty around key criteria and dates when clarity will be given, could delay much-needed investment in these critical energy storage projects."
Ahead of a meeting with Energy Minister Michael Shanks this week (Wed 23rd Oct), the BHA is urging the government and regulator Ofgem to:
- Provide a detailed timeline for the development and implementation of the cap and floor mechanism to ensure the scheme is introduced in 2025.
- Clarify the process for industry engagement in shaping the technical aspects of the scheme.
- Confirm dates for key milestones, including the publication of the technical decision document and the opening of the first allocation round.
The BHA is also seeking detailed discussions with energy regulator Ofgem to consider the design of the scheme, which is aimed at unlocking investment in LDES by striking a balance between commercial incentives, appropriate risk mitigation for project developers and value for the consumer.
The UK currently has 2.8GW of LDES across four existing pumped storage hydro schemes in Scotland and Wales, including Cruachan in Argyll, and Ffestiniog in Gwynedd, which already play a significant role in providing energy at peak demand.
Ofgem says the first round of applications is set to open in 2025, but the BHA is concerned that implementation of the scheme be as swift as possible since investment and certainty is needed.
LDES technologies including Pumped Storage Hydropower are crucial for integrating renewable energy and ensuring grid stability as the UK moves towards its net-zero goals.
Gilmartin added: "The BHA and its members are eager to work closely with Ofgem & the Department for Energy Security and Net Zero (DESNZ) to ensure this mechanism is implemented as speedily as possible. Time is of the essence in the global race towards clean energy and the UK has a significant early mover advantage that we must capitalize on.
"Our sector is poised to move forward rapidly, we need to lever the global supply chain, bring forward world-class skills, and attract international capital. With the right framework in place, we can secure the UK's position at the forefront of development in this crucial technology."
During roundtable discussions with the minister this week, the BHA will highlight the need for:
- Accelerated Implementation: The BHA will urge Ofgem and the government to bring forward the detail of the cap and floor mechanism at an accelerated pace. Swift action is crucial to maintain the UK's competitive edge.
- Global Opportunity: The LDES sector represents a global opportunity. The UK must attract investment, skills, and supply chain from around the world.
- Job Creation: Rapid development of LDES projects will create thousands of skilled jobs across the UK, supporting the government's agenda to bring forward high quality jobs.
- Energy Security: LDES technologies, particularly pumped storage hydropower, are vital for enhancing the UK's energy security, reducing reliance on fossil fuels in volatile international markets and avoiding costly curtailment.
The trade body says that across the UK, developers have a combined pipeline of more than 11GW of new Pumped Storage Hydro (PSH) projects, offering over 208GWh of storage capacity. Some of these projects are described as "shovel ready," awaiting only the implementation of an appropriate cap and floor mechanism to enable deployment.
