Iberdrola owned Scottish Power has revealed that it plans to more than double the generating capacity of the Cruachan hydroelectric power plant in Argyll.
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The company will carry out a two-year feasibility study before deciding whether to expand the 440 MW plant to generate 1040 MW.
SSE has previously announced plans to improve its Coire Glas hydroelectric plant in Lochaber, and the Scottish government has been supportive of these moves, claiming the country could be "on the verge of a new generation of hydro power".
More than doubling the Cruachan plant’s output would require years of work and cost hundreds of millions of pounds, but the potentially increased need for grid balancing with increasing intermittent renewables makes the project attractive.
Keith Anderson, Scottish Power's chief corporate officer said: "Pump storage is still the most efficient and effective way of storing energy, and then using it at times of high demand. That's why it works very, very well alongside wind farms."
Parent company Iberdrola recently completed a seven-year project to double the capacity of a similar pumped storage hydro plant at Cortes La Muela near Valencia to 1500 MW.
During a news conference Iberdrola chairman Ignacio Galan rejected suggestions that Scottish independence would threaten any plans to invest in Cruachan.