The project, which is estimated to cost around £800m, will feature a dam, a new reservoir, an underground cavern power station and underground tunnel system and an outlet area on the shore of Loch Lochy.

Once operational, the scheme, with an energy storage capacity of up to 30GWh, will extract, store and release energy to and from the electricity transmission system and will have minimal visual impact in the Great Glen.

A final investment decision may not be made before 2015 owing to some commercial and regulatory challenges including changes in the existing transmission charging regime for pumped storage and a long-term public policy and regulatory framework.

Construction of the project is likely to last for up to five years and create over 400 jobs at its peak.

SSE Renewables managing director Jim Smith said the combination of the size, flexibility and short response time means that the hydro scheme could provide significant benefits across the GB electricity system.

"The consent for Coire Glas is therefore very positive, but before SSE can make a decision to invest in the project there are some major hurdles to overcome.

"SSE is now keen to engage further with both the UK and Scottish governments, as well as other relevant organisations, to develop an appropriate solution to the commercial challenges that could enable what would be an important asset for the UK energy system to progress."