Up to 1000 jobs could be created as part of a £1 billion plan to double the amount of electricity that can be produced from a hydroelectric scheme half a mile underneath a Scottish mountain.

The Cruachan pumped storage facility on Ben Cruachan, east of Oban in Argyll, is known as the "Hollow Mountain" and operates in a gigantic man-made cavern.

But the site's capacity could be more than doubled if plans being considered by ScottishPower to construct a second huge cavern in the mountain go ahead.

Up to 1000 jobs would be created at the height of the 10-year construction phase.

Steven Camley's cartoon

Explainer graphic: How the Cruachan power plant works

The Spanish-owned energy giant is considering spending more than £1bn to boost the output of the pumped storage scheme from 440 megawatts to more than 1000MW.

If the plan becomes a reality, the project would become one of the UK's largest ever civil engineering projects. Its power output would be just under half of that of ScottishPower's largest generating asset, the Longannet coal-fired power station in Fife.

The firm's largest wind farm in Scotland is the 540MW Whitelee near Glasgow.

The plans would involve the construction of a second subterranean turbine hall beneath the 3694ft (1126m) Ben Cruachan, adjacent to the existing turbine hall, which was opened by the Queen in 1965.

It would also see the enlargement or reconstruction of the existing Cruachan dam, 1299ft above Loch Awe, to give the enlarged scheme sufficient water capacity in its upper reservoir, as well as a series of new tunnels enabling thousands of gallons of water to surge up and down between the two lochs.

First Minister Alex Salmond, who yesterday visited a pumped storage plant in Valencia, Spain, operated by ScottishPower's parent company Iberdrola, said: "This major announcement heralds a renaissance in hydro and pump storage energy, and opens another chapter in our outstanding history of harnessing renewables.

"The Scottish Government recognises the potential for future development at Cruachan and other similar proposals for hydroelectric storage to contribute to a balanced mix of energy generation across Scotland. This could see hydro-power generate up to one-third of Scotland's entire generating capacity in the next decade.

In October last year, Iberdrola completed a seven-year €1.2bn (£1bn) project to double the capacity of its largest pumped storage scheme, with the construction of a new turbine hall and the installation of four new turbines at La Muela, near Valencia. The capacity of La Muela, opened in 1989, was increased to 1800MW, surpassing the 1728MW Dinorwig facility in north Wales to become Europe's largest pumped storage scheme.

ScottishPower chief corporate officer Keith Anderson said: "We've already had initial discussions with one or two environmental groups. However, we believe in being open with all local community and stakeholder groups, which is why we're announcing this today.

"We expect the feasibility study to take between 12 and 18 months.

"This is a major infrastructure project in a competitive energy market. If it goes ahead, construction would probably take between five and six years."

Ignacio Galan, chairman of Iberdrola and ScottishPower, said: "The project to double the capacity of La Muela plant was a major engineering achievement … We see a new generation of pump storage hydro as being a major asset for electricity systems worldwide as more renewable electricity continues to come on stream."