Power giant Scottish and Southern Energy (SSE) is to consult on plans for a pumped storage scheme at Balmacaan between Drumnadrochit and Invermoriston.
The company is looking to build a station capable of producing up to 600 megawatts of electricity. At present, Scotland's largest pumped storage station is at Cruachan in Argyll and generates 440 megawatts, while the Glendoe scheme near Fort Augustus ¬ó a conventional hydro-electric station which was officially opened by the Queen this summer ¬ó generates just 100 megawatts.
The site for the proposed scheme is on the Balmacaan Estate and would involve building a dam and forming a new reservoir at the existing natural Loch nam Breac Dearga, about three kilometres to the northeast of Invermoriston.
Water would be pumped up from Loch Ness to the higher loch and then released to drive turbines housed in a large underground cavern off the A82. The only visible elements would be the dam and reservoir.
The project is still at a very early stage and initial views will be sought from organizations including Highland Council, Scottish Natural Heritage and Historic Scotland, as well as local community councils.
A series of public exhibitions will then be held ahead of SSE submitting an application to the Scottish Government by 2011.
The facility would work in the same way as the Foyers pumped-storage station, which also takes water from Loch Ness and has a capacity of 305 megawatts.
An SSE spokeswoman said the steep sided hills above the world famous loch, and the depressions between the peaks, made the area a prime site for hydroelectric generation.
"It would be a major investment for SSE," she stated.
"It will be a large engineering work and, as with the Glendoe scheme, during construction there will be opportunities for local contractors for work. It has got positive benefits for the local communities."
If the plans get the green light, it would take two to three years to build the plant with access for construction traffic would be off the busy A82.
As well as consultation on the Balmacaan scheme, SSE is proposing another 300 to 600 megawatt pumped storage plant at Coire Glas to the southwest of Laggan.
SSE's hydro development manager Neil Lannen said the company had a long history of developing and constructing hydroelectric schemes in the Highlands.
"Our goal is to maintain a diversified portfolio of power stations with the flexibility to respond to our customer demand for electricity," he said.
"Pumped storage can help us achieve this and the two sites identified within the Great Glen are ideal locations to utilize this technology."
Local residents and businesses were waiting to see the details of the Balmacaan scheme before committing themselves.
Businessman Willie Cameron, of Milton, Drumnadrochit, is in favour of hydroelectric schemes in principle.
"We have plenty of water here," he said.
"From that point of view, it is a renewable energy resource which is going to reduce the carbon footprint in the Highlands.
"Provided everything is hidden and underground, I would not have any objections."
However, he believes the local community, particularly tourist businesses, should be compensated if there is any disruption due to heavy traffic.
Graham Ambrose, executive director of Destination Loch Ness, had not heard about the scheme, but insisted that the visual impact would have to be carefully considered.