The Case for Pumped Storage Hydro in the UK's Energy Mix

Electrical energy storage (EES) is increasingly being considered as a necessary corollary to inflexible renewable generation [1,2] for electricity markets today and in the future. Energy storage is not new - the GB electricity system has benefited from pumped storage generation since the 1960’s. But no new stations have been built since the liberalisation of energy markets in the late 1980s. Investors have anticipated scale deployment of battery storage, but to date only limited capacity has been contracted by National Grid, largely for frequency control purposes. So the question arises, why did we recognise value in storage three decades ago but not now? Using the example of pumped hydro energy storage (PHES) – the dominant electrical EES technology currently deployed in GB – as a reference, this paper considers the question of how EES has been valued in the past. Crucially, we consider the issue of valuation beyond the economics of the energy system to a fuller social cost-benefit perspective. Has policy explicitly considered the question of societal valuation? What may be required in terms of valuation approaches to make the case for future investments in and deployment of storage capacity?
We draw three main conclusions. First, that there is a need to recognise and articulate the societal value that may be delivered by EES. Second, a market framework that recognises this value is needed. Third, development through both of these first two stages requires greater policy certainty and clarity round low carbon economic development pathways in general, and the outcomes that may be served by EES in particular.