The Scottish government has approved plans to expand Argyll’s Hollow Mountain underground power station.
Renewable power developer Drax proposes building a new £500m pumped hydro storage plant at its existing Cruachan facility near Oban.
The company said the extension could be operational in 2030 and support 1,000 jobs during its construction.
But before it can go ahead, the project needs new UK government policy that would support private investment.
Developers of pumped storage hydro schemes argue that the current UK energy market does not have the mechanisms to make such major projects attractive to investors.
The schemes are costly to build and take a long time to construct – between five to eight years.
The UK government said it did intend to enable investment in pumped hydro storage technology.
The existing underground power station at Cruachan was opened by the late Queen in 1965.
At the time, it was the first large-scale reversible turbine storage energy project of its kind in the world.
It is housed within a huge cavern dug out inside Ben Cruachan, which is nicknamed Hollow Mountain because of the project.
Drax has welcomed the Scottish government’s planning approval for the 600MW extension.
Chief executive Will Gardiner said: “This is a major milestone in Drax’s plans to build Britain’s first new pumped storage hydro plant in a generation.”
He said that with the right support from the UK government, investment would be made to more than double Cruachan’s generating capacity.
First Minister Humza Yousaf, on a visit to Cruachan, said the plans had the potential to help Scotland meet net zero targets.
He added: “The Scottish government will continue to urge the UK government to provide an appropriate market mechanism for hydro power and other long-duration energy storage technologies, to ensure that the potential for hydro power is fully realised.”
The UK government said it had already attracted billions of pounds in green investment, adding that Scotland had played a key role and benefited from this work.
A spokesman added: “Our plans to power up Britain are expected to attract a further £100bn investment and support 480,000 jobs across the UK, including Scotland, by 2030.
“Pumped hydro storage will help deliver greater energy security and economic growth and we have already confirmed our intention to enable investment in these technologies while removing regulatory barriers.”
Industry body Scottish Renewables said the Cruachan extension, along with similar projects, would be essential for ensuring energy security and keeping energy bills low.
Pumped storage uses reversible turbines to pump water from a lower reservoir to an upper reservoir where the water is stored. The turbines are powered by excess electricity from wind farms.
When there is high demand for electricity, the water is released back through the turbines to generate power.
Top picture: The Visitor Centre at Cruachan on the road to Oban in Argyll.