New era for pumped storage hydro (PSH) development

As the UK energy system shifts from being dominated by fossil fuels to one driven by intermittent solar and wind power, the need for sustainable energy storage is increasing.

 Energy storage plays a key role in enabling the integration of more renewables into the UK energy system and accelerating progress toward Net Zero while enhancing energy security. Long Duration Energy Storage (LDES) offers significant system and consumer benefits by minimizing wind curtailment costs, which are largely passed on to consumers, and reducing reliance on expensive gas generation.

The Earba Storage Project at Newtonmore, Highland is a pumped storage hydro (PSH) project with an installed capacity of 1,800 MW and a storage capacity of 40,000 MWh, making it the largest project of its kind in the UK. The proposal is to link Loch Leamhain and Loch Earba via a 3km tunnel building a powerhouse on the shore of Loch Earba which will extend deep underground. Turbines will be located at the bottom of the powerhouse shaft and will generate electricity in times of national demand.

Carl Crompton, managing director of developers Gilkes Energy said:

“We are thrilled to share that our flagship pumped storage hydro project, Earba has received full planning approval from the Scottish government and secured a place in Ofgem’s ‘Super Battery’ Cap & Floor Support scheme”. 

Supporting a government growth pledge to build major new LDES projects for the first time in 40 years, Ofgem launched a new cap and floor support scheme in April to unlock billions in investment.

Cap and Floor is a regulatory scheme, where ‘cap’ refers to a quid pro quo arrangement that sets a maximum revenue and sees projects pay money to consumers if they end up making more than is considered a fair rate of return on invested capital. ’Floor’ is the minimum revenue provided to the project. If the project's revenue falls below this floor, consumers pay the LDES operator the difference up to the floor level.   Being awarded a cap and floor means the project is underwritten to provide financial protection on the downside. It ensures that the project can earn a minimum income to recover their investment. If revenue is high, consumers are rewarded with the excess revenue being shared with consumers.  

The next stage of the process is a multi-criteria assessment (MCA) where Ofgem, working alongside the National Energy System Operator (NESO), will select a small number of Long Duration Electricity Storage (LDES) projects to be awarded a cap and floor contract in mid-2026. The MCA process scores projects across multiple criteria including deliverability, value for money and contribution to wider societal benefits such as reductions in consumer and system balancing costs.

Earba is expected to score well in this process owing to its location and local topography which means it can be delivered at a very competitive capital cost.

 “We look forward to working with Ofgem, NESO, the PSH supply chain and our investors to bring this exciting project to fruition”, added Project Director, David Tomb.

“With procurement now underway for key packages, including site investigation works, electrical and mechanical equipment, and the main civil works, this announcement sends a clear and confident signal to the market: Earba PSH is advancing at pace, backed by the regulatory support that will secure delivery.

For suppliers and delivery partners, Earba offers long-term opportunity, commercial certainty, and the chance to contribute to one of the UK’s largest and most ambitious energy infrastructure projects, playing a pivotal role in the transition to net zero.”