SSE – Written evidence (LES0003)


SSE plc is a FTSE-30 company headquartered in Perth, Scotland and with interests across the UK and Ireland, Europe, North America and Asia Pacific. We are a leading generator of renewable electricity and one of the largest electricity network companies in the UK. We develop, own and operate low carbon infrastructure to support the low-carbon transition. This includes onshore and offshore wind, hydro power, electricity transmission and distribution grids, and efficient gas-fired generation, where we are at the leading edge of decarbonisation with developments in carbon capture and storage and hydrogen. We also provide energy products and services for businesses.


In November 2021, SSE announced a fully funded, £12.5bn Net Zero Acceleration Programme, which will see us expand on our ambition to be the UK’s clean energy champion, creating 1,000 jobs a year to 2025. In May 2023 this plan was updated with a fully funded £18bn five-year investment plan to 2027. The programme will see SSE building the world’s largest offshore wind farm at Dogger Bank. We will also deliver over 20% of the necessary upcoming electricity networks investment in the UK to connect renewable energy and enable electrification of heat and transport, alongside investment in critical technologies like carbon, capture and storage, hydrogen, solar and pumped storage hydro. Our investment could total up to £40bn across the decade to 2031/32.



1. How much medium- and long-duration energy storage will be needed to reach the Government’s goal of a fully decarbonised power grid by 2035 and net zero by 2050, and by when will it need to be ready?


The UK will need to deliver up to a six-fold increase in its electricity storage capacity by 2030 to boost the resilience of our energy system and complement the growth in variable power generation. To underpin the surge in renewables an electricity storage plan should be put in place to strategically deploy short-, medium- and long-duration storage technologies ahead of system need. Left to market signals alone there would be an under procurement of electricity storage as each storage asset will cannibalise each other. Therefore alongside a strategic plan for electricity storage deployment, a support mechanism for different storage needs will be required to ensure sufficient volume is deployed and to reduce costs through mitigating risks (as is done under the CfD for wind). A study by Aurora[1] has shown that 24GW of long-duration electricity storage (greater than four hours duration), an eight-fold increase, is required by 2035 to meet the Government’s decarbonisation commitment cost-effectively and securely.


Under what scenarios would the grid draw heavily on long-duration storage? How well are these scenarios understood?

As the deployment of renewable energy developments is accelerated to support the transition to net zero, long-duration energy storage will play an integral role in maximising the use of renewable energy.


For example, National Grid ESO, as part of its 2023 Future Energy Scenarios (FES), stated that more than a tripling of pumped storage capacity may be required by 2050 to reach Net Zero across the economy[2].



2. How sensitive is the amount of storage needed to assumptions about the future balance of supply and demand on the grid?


Carbon capture & storage (CCS) and hydrogen have been identified by the Climate Change Committee (CCC) as vital for balancing a renewables-led system through providing flexibility to the system. Both CCS and hydrogen will also support the decarbonisation of industries where emissions are hard to abate such as steel making. The level of ambition for these technologies and the pace at which policy is being developed to support deployment is not where it needs to be. Importantly, power CCS can provide an economic long-term user of CCUS infrastructure, helping to deploy CCUS and hydrogen infrastructure within industrial clusters, and reducing costs to other users.


Government should commit to making the UK the world leader in CCS technology to accelerate decarbonisation and boost UK energy security by:



The UK has a significant opportunity to take a central role in European energy security by creating hubs for offshore wind and hydrogen in the North, Celtic and Irish seas to become a net exporter of electricity by 2027, and a net energy exporter by 2040.


A well-designed and well-built offshore grid can deliver at the lowest cost and in the most efficient way, allowing power to flow to the right place at the right time. This will involve interconnection and cooperation between the UK and neighbouring countries through a harmonised approach, requiring alignment on electricity and carbon markets. The next generation of electricity interconnectors will be vital to achieving this: Multi-Purpose Interconnectors (MPIs), which connect the UK and Europe to clusters of wind farms in the North Sea. Beyond MPIs, development of Energy Islands where grid infrastructure and additional energy infrastructure could be located cost effectively should be explored.


Beyond electricity infrastructure, hydrogen interconnectivity will be important to unlocking the renewables potential of Ireland and Scotland to boost European energy security. Alongside coordinated infrastructure plans, appropriate market arrangements will be required to ensure cost and benefits are shared fairly.



3. Which technologies can scale up to play a major role in storage?


Pumped Storage Hydro

Pumped storage hydro is the world’s largest, most proven, cost-efficient, and mature electricity storage technology that can deliver critical system flexibility. It accounts for over 94 per cent of installed global energy storage capacity, well ahead of lithium-ion and other battery storage technologies.


Pumped hydro storage works by using two reservoirs of water at different elevations over a short distance that can generate power as water moves down from one reservoir to the other, passing through turbines. It can also pump water back into the upper reservoir at times of excess renewable energy generation; this allows the excess renewable power to be captured and stored, similar to a giant natural battery. Then the energy is discharged for use during those periods where renewable energy generation is lower. This flexible technology will be critical to a renewables-led energy system in the UK in the years ahead by reducing curtailment, transmission congestion, and the overall costs and emissions in the power sector.


Coire Glas






Hydrogen Storage

Hydrogen can act as a form of energy storage for the electricity system, particularly when integrated with electrolytic hydrogen production. As with other forms of storage, it has the ability to demand shift, using renewable electricity to produce hydrogen when output is high. The hydrogen can then be stored and used at times of peak demand, as a fuel in power stations, providing dispatchable, flexible capacity or as a fuel for industrial uses. Storage can also support CCS enabled hydrogen production.


For CCUS-enabled hydrogen production, it can support efficient baseload electricity production. Applying CCUS to electricity and hydrogen production will enable the UK and Europe to continue to utilise its existing gas storage capacity while reducing its carbon emissions.


Hydrogen transport and storage infrastructure will be crucial to the development of a sustainable hydrogen economy. This supporting infrastructure will help underpin investment in production and fuel switching, bolstering low-carbon hydrogen, security of supply and balancing the supply and demand dynamics expected in the market.


Given there is a pressing requirement for new low-carbon power generation to support an increasingly renewables-led system, hydrogen can provide vital low-carbon flexibility and is in a position to provide an early anchor demand for storage, with wider system value expected in the medium term as the market develops.


Hydrogen will have a role to play in other sectors as well, and as demand increases, we anticipate the requirement for storage does too. Large-scale storage is likely to be needed to support the UK Government’s 10GW hydrogen production ambitions. We believe that underground storage, through salt caverns and depleted gas fields provide the best opportunities to deliver this, combined with smaller scale above ground storage facilities.


SSE has three main hydrogen projects in development which we can share more detail with the Committee on request:


Aldbrough Hydrogen Storage



Aldbrough Hydrogen Pathfinder



Gordonbush Hydrogen Project



Last year AFRY Management Consulting published a report titled the ‘Benefits of Long Duration Electricity Storage’ which detailed which technologies are best suited to help balance the system over different durations.[3]



4. What policy support is currently in place to support deployment of storage technologies? Is it sufficient to support deployment at scale?


Pumped Storage Hydro

There is currently no policy support mechanism through an appropriate market framework in place to enable investment in large-scale long-duration electricity storage technologies to be deployed at scale in the UK. Given its high capital costs, long lead times and the lack of revenue certainty faced by pumped storage developers, there is broad industry support for a revenue stabilisation mechanism in the form of an adapted ‘cap and floor’ scheme. This would also be alongside broader consideration of how the electricity market, including the Capacity Market values the contribution of low-carbon, flexible assets such as pumped storage.



Despite the important role of hydrogen storage in delivering a hydrogen economy, it is challenging to identify a merchant investment case at present due to demand and supply uncertainty, so we believe a business model will be crucial to facilitate investment. The UK Government has set out a minded-to position on the design of a hydrogen storage business model, which is designed to support investment in these assets, recognising that large scale storage assets, which will be fundamental for a hydrogen economy, can have a longer development and construction lead time compared to other elements of the hydrogen value chain, for example production. Maintaining momentum in finalising this business model, with legislative underpinning set out in the Energy Bill, will be crucial in supporting the delivery of a hydrogen economy and delivering on the UK Government’s hydrogen production target of 10GW by 2030.


Demand side flexibility, lithium-ion batteries and long duration storage will be required to decarbonise electricity systems cost effectively. However, long duration storage options like hydro pumped storage and hydrogen storage have steep upfront costs and long lifetimes, meaning current market mechanisms to support new build such as the Capacity Market (CM) and Contracts for Difference (CfD) will not provide the correct level and structure of payments to unlock investment in this strategic geological long duration storage capacity for the UK. These existing support mechanisms are also designed for different purposes – hydrogen electrolysis and hydrogen storage do not provide system security (as defined in the CM), and do not directly provide electricity (as the CfD contracts are structured to incentivise).


Pumped Storage Hydro



The Government needs to take a holistic approach to the development of a hydrogen economy, recognising the need for hydrogen production, transport, storage and demand to be brought forward in a joined-up way. The Government should:



Pumped Storage Hydro

Reforming Transmission Network Use of System (TNUoS) charges to recognising the contribution of pumped storage to relieving constraints, rather than charging them at a high rate as if they worsen constraints, would avoid deterring investment in pumped storage in Scotland.



The Future System Operator (FSO), which will be the successor organisation to National Grid ESO, is likely to be best placed to consider the interactions between the electricity/power system and the hydrogen system. Given an expected reliance on renewable power generation to support electrolytic production of hydrogen and the role of hydrogen in the power sector, there will be benefits for these to be considered in tandem. The speed at which planning and approvals are taken is essential to the build out of this economy.


Strategic planning will be required prior to the FSO taking on this role, so in the meantime DESNZ could be well-placed to begin the strategic planning process as it has done with CCUS, to support the delivery of government targets (including 10GW of production by 2030 with half from electrolytic production), carbon budgets and net zero goals.


REMA should ensure the electricity system has a mix of short, medium and long duration electricity storage capabilities to deliver on its 2035 objectives to decarbonise the electricity system, with a particular need to ensure market frameworks value sustained response.


Deploying 21GW of batteries, 5GW hydro pumped storage and 40GW of hydrogen electrolysers (with hydrogen storage and 25GW of hydrogen-fired electricity generation), would save £2bn by 2040 and help develop the UK’s hydrogen economy and secure a domestic supply[4].


While proponents may argue that locational marginal pricing (LMP) will support the business case for flexible storage assets, we do not agree. What is important for investment decisions in capital infrastructure be it batteries, hydro pumped storage or hydrogen electrolysers is being able to forecast expected revenues. Therefore, while LMP may increase volatility increasing usage of storage assets, the downside risk of an unforecastable market will add to the cost of capital of storage assets. We are clear that to deliver a decarbonised electricity system by 2035, nodal and zonal need to be removed from the next steps of REMA due this Autumn.


As the UK transitions to a decarbonised electricity system by 2035 there will be an increasing need for flexibility, in particular electricity storage at all scales and in the most optimal locations. The current market arrangements are clearly not sufficiently incentivising those storage technologies best able to provide system flexibility over much longer durations and therefore there is need do so as outlined.



5. How well developed is the UK industry across different storage technologies, such as hydrogen or redox flow batteries? How does the UK compare to global competitors in these industries?






Pumped storage hydro





7. What steps should the Government take now to ensure this storage can come online later in the current decade?


Pumped Storage Hydro

In the British Energy Security Strategy, the Government committed to having an appropriate policy framework in place by 2024 to enable investment but no detail has yet been provided. The Government’s timetable to make an announcement needs to be urgently accelerated to ensure projects such as Coire Glas can support the grid by the end of the decade.




25 August 2023


[1] Aurora Energy Research (2022) Long Duration Electricity Storage in GB

[2] National Grid ESO - Future Energy Scenarios


[4] LCP (2022) - Impacts and implications of the British Energy Security Strategy (BESS)

[5] Scottish Renewables - The Economic Impact of Pumped Storage Hydro