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Released October 22, 2024 | GALWAY, IRELAND
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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--The U.K.'s Department for Energy Security and Net Zero (DENSZ) has announced an investment support scheme to help build long-duration energy storage (LDES) facilities for the first time in more than 40 years.
The proposed "cap-and-floor" scheme comes after a year of consultation and will be overseen by the country's energy regulator, Ofgem, which already uses such a scheme to encourage investment in electricity interconnectors with neighboring European countries. The first round of financing will open to applicants next year and be divided into two application routes: one focused on mature technologies like pumped storage hydro and another on innovative technologies including liquid air energy storage, compressed air energy storage and flow batteries. The latter are currently in development and the government said that they "would benefit from investor support".
The cap and floor system works by guaranteeing a minimum revenue for investors (floor) to incentivise them and provide debt security while there is a regulated limit (cap) on revenues to avoid excessive returns. The government will top up investors' revenue if they fall below the "floor" price while excessive returns above the "cap" will be returned to the government to be passed onto consumers. Research by DENSZ estimated that deploying up to 20 gigawatts (GW) of long duration storage could result in estimated system savings of up to £24 billion between 2025 and 2040. To date, the U.K. has just 2.8 GW of LDES from four existing pumped storage hydro facilities in Scotland and Wales that were built between 1963 and 1984.
U.K. Energy Minister Michael Shanks said: "We are wasting no time in unlocking Britain's vast renewable potential by expanding wind and solar power. But we also need to increase our ability to store this energy for when the sun isn't shining, or the wind isn't blowing. We're reversing a legacy that has seen no new long-duration storage built for 40 years - and taking steps to unleash private investment in both established and new technologies. With these projects storing the surplus clean, homegrown energy produced from renewable sources, we can boost our energy security by relying less on fossil fuels."
Industrial Info is tracking 21 pumped-hydro related projects in the U.K., including 11 grassroot projects, worth almost US$17 billion in investment. Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can click here for the reports.
The government's plan has been welcomed by the energy industry. Mark Sommerfeld, deputy director of policy at the Association for Renewable Energy and Clean Technology (REA) said: "Long-duration energy storage is essential for meeting future low-carbon energy demands in a cost-effective way while ensuring the security of supply. Today's announcement finally confirms a scheme the REA long advocated for to unlock private investment in several ready-to-go projects, allowing construction to begin. We are also encouraged by the government's initial focus on pumped hydro storage and pleased to see a clear pathway for other innovative long-duration storage solutions that are also ready for deployment and can deliver additional benefits to our power system."
Drax Group plc, (Selby, England), which is advancing an option to its existing Cruachan pumped storage facility in Scotland with the addition of a new 600-megawatt (MW) plant, supported the move. "Today's announcement is a critical step forward to removing one of the key hurdles developers face in building a new generation of pumped storage hydro plants," commented Ian Kinnaird, Drax's Scottish Assets Director. "Pumped storage stabilizes the electricity system, helping to balance supply and demand through storing excess power. When Scotland's wind turbines are generating more power than we need, Drax's Cruachan steps in to store the renewable electricity so it doesn't go to waste." The new addition will more than double Cruachan's current capacity to more than 1 GW.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
The proposed "cap-and-floor" scheme comes after a year of consultation and will be overseen by the country's energy regulator, Ofgem, which already uses such a scheme to encourage investment in electricity interconnectors with neighboring European countries. The first round of financing will open to applicants next year and be divided into two application routes: one focused on mature technologies like pumped storage hydro and another on innovative technologies including liquid air energy storage, compressed air energy storage and flow batteries. The latter are currently in development and the government said that they "would benefit from investor support".
The cap and floor system works by guaranteeing a minimum revenue for investors (floor) to incentivise them and provide debt security while there is a regulated limit (cap) on revenues to avoid excessive returns. The government will top up investors' revenue if they fall below the "floor" price while excessive returns above the "cap" will be returned to the government to be passed onto consumers. Research by DENSZ estimated that deploying up to 20 gigawatts (GW) of long duration storage could result in estimated system savings of up to £24 billion between 2025 and 2040. To date, the U.K. has just 2.8 GW of LDES from four existing pumped storage hydro facilities in Scotland and Wales that were built between 1963 and 1984.
U.K. Energy Minister Michael Shanks said: "We are wasting no time in unlocking Britain's vast renewable potential by expanding wind and solar power. But we also need to increase our ability to store this energy for when the sun isn't shining, or the wind isn't blowing. We're reversing a legacy that has seen no new long-duration storage built for 40 years - and taking steps to unleash private investment in both established and new technologies. With these projects storing the surplus clean, homegrown energy produced from renewable sources, we can boost our energy security by relying less on fossil fuels."
Industrial Info is tracking 21 pumped-hydro related projects in the U.K., including 11 grassroot projects, worth almost US$17 billion in investment. Subscribers to Industrial Info's Global Market Intelligence (GMI) Power Project Database can click here for the reports.
The government's plan has been welcomed by the energy industry. Mark Sommerfeld, deputy director of policy at the Association for Renewable Energy and Clean Technology (REA) said: "Long-duration energy storage is essential for meeting future low-carbon energy demands in a cost-effective way while ensuring the security of supply. Today's announcement finally confirms a scheme the REA long advocated for to unlock private investment in several ready-to-go projects, allowing construction to begin. We are also encouraged by the government's initial focus on pumped hydro storage and pleased to see a clear pathway for other innovative long-duration storage solutions that are also ready for deployment and can deliver additional benefits to our power system."
Drax Group plc, (Selby, England), which is advancing an option to its existing Cruachan pumped storage facility in Scotland with the addition of a new 600-megawatt (MW) plant, supported the move. "Today's announcement is a critical step forward to removing one of the key hurdles developers face in building a new generation of pumped storage hydro plants," commented Ian Kinnaird, Drax's Scottish Assets Director. "Pumped storage stabilizes the electricity system, helping to balance supply and demand through storing excess power. When Scotland's wind turbines are generating more power than we need, Drax's Cruachan steps in to store the renewable electricity so it doesn't go to waste." The new addition will more than double Cruachan's current capacity to more than 1 GW.
Industrial Info Resources (IIR) is the leading provider of industrial market intelligence. Since 1983, IIR has provided comprehensive research, news and analysis on the industrial process, manufacturing and energy related industries. IIR's Global Market Intelligence (GMI) helps companies identify and pursue trends across multiple markets with access to real, qualified and validated plant and project opportunities. Across the world, IIR is tracking over 200,000 current and future projects worth $17.8 Trillion (USD).
