| Finance
decision to finalise and implement a new cap and floor investment framework to support the deployment of long-duration electricity storage projects, such as pumped storage hydro. The British Hydropower Association says this
represents a significant step forward in unlocking the potential of LDES and strengthening the UK’s position as a clean energy leader, while energy company SSE added this can unlock investment in critical nation building projects including what will be the UK’s largest natural battery - SSE’s 1.3GW Coire Glas pumped storage hydro scheme. The announcement by the Department for
Energy Security and Net Zero follows a consultation held earlier in 2024 which proposed a cap and floor scheme to encourage LDES investment. An appropriately designed cap and floor scheme will provide a revenue stabilisation mechanism aimed at unlocking significant private investment in long duration electricity storage projects in the UK, in the same way it has unleashed investment in electricity interconnectors. SSE is progressing its flagship pumped storage
hydro Coire Glas project in the Scottish Highlands which could deliver up to 30GWh of storage capacity if built, doubling the total electricity storage capacity in Great Britain today. When commissioned, it would become the UK’s largest natural battery, providing vital back up for renewable power. SSE Renewables hopes to make a final investment decision on the 1.3GW project pending successfully securing a cap and floor agreement in an appropriately designed scheme. Robert Bryce, Director of Hydro, SSE Renewables, said the government’s announcement is a massive step forward in delivering more of the flexible homegrown energy the UK needs in its transition to net zero. He believes SSE’s Coire Glas has the potential to be at the forefront of delivering much needed large- scale long duration electricity storage, and this flagship project in the Scottish Highlands can shift the dial on pumped hydro storage. “We now need to harness momentum from this decision and accelerate at pace with a clear timetable to implement the new framework so clean energy investors like SSE can take positive decisions to unlock investment in these nation building projects,” Bryce added. “SSE will continue to work closely with the government and Ofgem as the regulator and delivery body to support a speedy implementation, so we can unlock investment in Coire Glas and other large scale storage projects to secure the benefits to UK consumers and society that they bring.” Kate Gilmartin, CEO of the British Hydropower Association, said the announcement about the cap and floor mechanism marks a pivotal moment for the UK’s clean energy future, and the BHA wants to ensure the mechanism is implemented swiftly. “Time is of the essence in the global race towards clean energy leadership, and the UK has a significant early mover advantage on which we must capitalise,” Gilmartin commented. “With the right framework in place, we can secure the UK’s position at the forefront of this crucial technology,” she said. The BHA has been campaigning for such a ‘cap and floor’ mechanism to help create vital investment in renewable energy storage. 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. 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.
Fair finance
Financial institutions can be partners for change and have significant influence over the companies they fund. As highlighted by recent research undertaken by Fair Finance Asia when looking into hydropower financing in the Mekong Region, banks and finance institutions can transform the hydropower sector by holding companies accountable for their environmental and social practices. Ultimately, they can ensure these projects meet higher ethical standards. According to Bernadette Victorio, Programme Lead of Fair Finance Asia, there is still a need for financial institutions to develop more robust, transparent and accountable policies that align with international sustainability standards, including those addressing human rights violations and ecological degradation. With many financial institutions based in Thailand and Vietnam investing in hydropower projects across borders, particularly in Laos, cross-border financing has become a critical aspect in the Mekong Region, where financial institutions from one country fund hydropower projects in another. Such cross-border investment can complicate accountability because countries’ regulatory standards and sustainability principles will vary. In this context, Victorio emphasises the need for more harmonised policies to transcend national borders, ensuring that these projects’ ecological and social impacts are mitigated across the entire region. Stronger regional cooperation, particularly among Mekong countries, is also necessary to ensure cross-border investments adhere to sustainable practices.
With financial institutions holding the power to influence the future of energy development in the Mekong Region, their investment decisions will
Below: The Sloy hydro scheme located on the west bank of Loch Lomond in Scotland. Energy company SSE, which welcomes the UK government’s recent announcement on a cap and floor scheme, plans to convert this 152MW station into a pumped storage hydro project
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