Pumped-storage hydropower is the oldest energy storage technology and provides about 95% of worldwide storage capacity. So why do talks about the future of energy storage often leave out pumped storage?
Energy storage can be divided into three main types, according to the London-based research group Carbon Trust: bulk (e.g., pumped storage hydro and compressed air); distributed (e.g., lithium-ion battery and pumped heat storage); and fast that can provide instantaneous response (e.g., flywheels and supercapacitors).
Pumped-storage hydropower is the oldest energy storage technology and provides about 95% of total worldwide storage capacity. However, in the global move toward developing additional energy storage facilities and integration to the grid with new energy storage-based distributed energy resources (DER), pumped storage is less a part of the discussion. But why?
Discussion and analysis
Worldwide, hydropower development grew steadily in 2017 with an estimated 31.5 GW of new capacity, according to the International Hydropower Association. IHA, in its 2017 Key Trends report, says “… this includes 6.4 GW of pumped storage, nearly twice the amount installed in 2015, and brings the world’s total installed hydro capacity to 1,246 GW. Total hydro generation for 2016 is estimated at 4,102 TWh, the greatest ever contribution from a renewable source.”
The latest information from the Global Energy Storage Database, maintained by the U.S. Department of Energy’s (DOE) Office of Electricity Delivery and Energy Reliability, says that worldwide, there are about 352 pumped storage projects in operation and being constructed, which have a total capacity of about 183.85 GW (see Figure 1).
Given the above, Why is pumped storage hydropower neither the main focus nor integral in energy storage discussions? This article features input on this topic from several veteran power industry professionals:
– Jack Heaton, director, business development, Andritz Hydro Corp., U.S.
– Harrison Holihan, executive associate, Genex Power, Australia
– Michael Manwaring, chair of the National Hydropower Association’s Pumped Storage Development Council, U.S.
– Andy Skumanich, PhD, chief executive officer, SolarVision Co., U.S.
– Richard Taylor, chief executive, International Hydropower Association, UK
– Kevin Young, president, Young Energy Services, U.S.
Q: What are the primary factors precluding pumped storage hydropower from being included in the broader discussion on energy storage?
Heaton: In my opinion, there are a variety of factors. They include licensing regulations and requirements; engineering development cost; cost versus other methods [of energy storage]; long lead time and high cost of completing federal licensing requirements; environmental, geotechnical, and political constraints; and long-distance interconnection issues.
Holihan: The Australian Federal Government holds the firm position that pumped storage can be used to balance the intermittency of renewables in the National Electricity Market (NEM). This interest is reflected in Prime Minister Malcolm Turnbull’s support for the technology via the National Energy Guarantee. The NEG places a heavy focus on dispatchable, reliable and affordable electricity production, all qualities held by pumped storage hydro.
There are three pumped storage projects operating in Australia, with a further three proposed for development, including Genex Power’s 250-MW Kidston Pumped Storage Hydro Project, which uses an abandoned gold mine to save construction cost and time.
Adoption of the NEG will place greater value on technologies such as pumped storage hydro, with those generators who hold advanced projects in the best position to capitalize on this new market movement.
However, there are still constraints that may be hindering this new energy boom in pumped storage in Australia. One of the primary constraints is the absence of large-scale storage certificates for generators. Large-scale renewable energy generators are rewarded with generation certificates for every MWh produced. These act as an additional form of trading currency and greatly assist with developers’ project financing. Adoption of large-scale storage certificates as an additional form of currency would aid project developers and promote further uptake of these developments in the NEM.
Another constraint is the absence of a capacity market. Under a capacity contract, generators are paid to simply have energy storage available and, if called upon (based on pricing), would generate into the NEM. Adoption of a capacity market could be considered as an alternative solution to the adoption of large-scale storage certificates. This market restructure would also promote further investment into pumped storage hydro.
Manwaring: In many technical discussions, pumped storage is a primary component of the energy storage discussion. Where it is not the case is often in broader policy or political arenas. Only recently has hydropower and pumped storage even been in the political discussion. The National Hydropower Association (NHA) in the U.S. has done an excellent job ensuring pumped storage is elevated in policy discussions, but unfortunately it is often a reactionary effort in response to pumped storage being left on the sideline.
Reasons for pumped storage not always being included in broad energy storage discussions range from an ideological disapproval of hydropower to a lack of understanding by many policy makers of the true capabilities of pumped storage. Furthermore, when policy makers seek information on energy storage technologies, various resources often fail to include pumped storage when presenting the technologies and tend to focus only on newer energy storage resources (i.e., batteries). Pumped storage has been around for decades and is often overlooked for its significant technological advancements, especially related to the integration of other renewable energy resources. Fortunately, we are seeing this trend reversed and pumped storage becoming a more active player in broader energy storage discussions.
Another point of potential confusion with energy storage resources likely results from the organization of DOE, which has been a major proponent of energy storage technologies and projects in the U.S. DOE has an energy storage division that funds and promotes the advancement of various energy storage technologies, with the exception of pumped storage – which, along with other hydropower resources, is under the prerogative of DOE’s Water Power Technologies Office. If policy makers or media outlets look to DOE’s energy storage resources, pumped storage may not appear as a viable technology.
Skumanich: Pumped storage hydro has been getting little attention lately because of the buzz about lithium-ion batteries. However, there are significant benefits from pumped storage that are worth recalling. Given the rapid deployment of solar and wind worldwide, there is a need for storage to mitigate the intermittency of renewable energy generators.
Pumped storage is an ideal candidate for utility-scale high power/long duration applications. One important point that is lost is the storage does not need to be co-located with the generation source. This has often been stated by regional power grid operators, and it holds true for most regions that already have a transmission grid. There is no intrinsic advantage for co-location of any co-gen or storage element with renewables.
Taylor: Despite the projected growth, a number of factors are serving to hold back new projects. Uncertain market conditions undermine the business model, with projects being capital-intensive and requiring long-term investor confidence.
Although somewhat overlooked by policy makers, IHA analysis indicates about 100 pumped storage projects are currently planned worldwide, which could increase global storage capacity by 50% to almost 225 GW.
Young: Pumped-storage hydro projects recognize part of their benefit through economy of scale. Large projects require large amounts of investment dollars, but without a power purchase agreement in place they are difficult to finance. Presently, power industry planning and aversion to risk restrict the development of such facilities.
Industry trends are focusing on distributed generation and storage, which is more directed toward batteries and other forms of storage related to bringing DER and renewable generation to market.
Pumped storage is often site-specific, although if it is viewed as an International Organization for Standardization-type resource then this factor becomes less important.
A related factor is that pumped storage is often considered a generation resource but some are promoting it as a transmission resource. It is really a generation resource sometimes and a transmission resource sometimes and needs to be promoted as both, with return on investment coming from both.
Q: How can the hydropower industry gain better prominence for pumped storage in the overall energy storage discussion?
Heaton: I think pumped storage can gain better prominence if as an industry we can demonstrate to government potential advantages from tax incentives for pumped storage hydro. The industry could also improve the public image of pumped storage as environmentally friendly (i.e., CO2, fish, recreation); demonstrate synergy and advantages of working with solar and wind; avoid ties to federal water/land, which would comparatively allow for fewer forego Federal Energy Regulatory Commission issues; and reward or incentivize utilities and investors that commit to the inherent long-term development process.
Holihan: Energy security was one of the most politically sensitive and discussed topics in Australia during 2016 to 2017 at all levels of government, given the rise in electricity prices and the occasional discrepancy between supply with demand.
As a result, an independent review was completed by the Chief Scientist of Australia, Dr. Alan Finkel, and provided to the NEM. The federal government, through Prime Minister Turnbull, announced that large-scale energy storage was the solution to these issues, with a particular emphasis around pumped storage hydro.
There is a clear movement and transition toward a market that requires large-scale energy storage, and this is reflected in present day discussions and the value that financiers are now placing on pumped storage in Australia.
Manwaring: As an industry, we need to continue to proclaim the message that hydropower and specifically pumped storage is an essential part of fulfilling the U.S. energy and renewable energy plan. Leaders need to have a longer-term commitment to this energy storage solution, given the longer licensing processes, project lead times and return on investment.
Better integration and collaboration between federal and state agencies in early stage licensing can help improve the pumped storage project implementation process. And, future policy updates and changes should encourage the development and deployment of all energy storage solutions, including pumped storage.
There is a place for all renewable energy and energy storage resources in the U.S. energy portfolio. Pumped storage is a proven grid-scale energy storage solution that can benefit the growth of renewable resources and help local and state agencies achieve their aggressive green energy goals.
Skumanich: Within proposals for pumped storage hydro, our industry could do better in informing investors, politicians and the general public that there are new innovative approaches to this energy storage system. The emerging opportunities are exciting and pumped storage no longer requires mountains to provide the topography.
With this system as part of an energy portfolio, there is a substantial opportunity to extend DER and even to develop low-cost electricity this has high reliability and dispatchability while still remaining green.
Some of the developing regulatory requirements of dispatchability from renewable energy means pumped storage offers an ideal partnership within the grid infrastructure. Batteries have their place, but they are still “chemistry experiments” and have real cost issues. Pumped storage hydro is not free, but once the infrastructure is in place, the levelized cost of electricity is very attractive at about US$0.10 per kWh – even approaching half that level. And, the lifetime of this technology is orders of magnitude beyond that of batteries needed for utility-scale support.
Taylor: Pumped storage projects could be unlocked through new sources of green finance, including climate bonds. However, the current lack of appropriate eligibility criteria means that investment is not flowing as it should. The overall carbon footprint for pumped storage is very competitive, but what is required is clarity in the methodology to demonstrate this.
In some jurisdictions, there are also regulations that prohibit potential players from becoming pumped storage developers. For example, there can be barriers between a generation company and a transmission company, and pumped storage does not easily fit into that ring-fencing. A pumped storage operator may be seen as a consumer there to provide grid services, match supply and demand, and absorb surplus, and/or a generator selling competitively priced peak electricity.
At IHA, we are closely monitoring the development of pumped storage and working on practical guidance to institutional investors to better define the business case for pumped storage and build investor confidence.
Young: Pumped storage hydro development needs alternative tariffs and different forms of revenue return. It also needs to be allowed more than one form of return depending upon its form of operation and the benefits it brings to the system.
Although utilities say it could be financed if it could be a regulated, rather than an unregulated, resource, the reality is that it needs to be recognized as a generation and transmission resource so it can be a regulated resource. And, because it does not actually provide any new electricity, it only regulates its distribution. Whether a resource is regulated or unregulated does depend on the regulation status of the state involved.
As an industry, we need to encourage utilities to continue to promote the need for larger scale energy storage and not to let the battery folks dominate the discussion.
I try to beat this drum – encouraging utilities to continue to promote the need for larger scale energy storage – but I find the trend in developing batteries for DER tends to dominate the energy storage discussion.
Hope for the future
Pumped storage hydropower is stable and overwhelmingly dominates the energy storage market. As the International Renewable Energy Agency cites in a recent report, Renewable Power Generation Costs in 2017, in 2016 more than 96% of energy storage was provided by pumped storage hydropower, thermal storage contributed 1.9%, electro-chemical batteries added 1% and electro-mechanical storage accounted for 0.9%. This data comes from the U.S. DOE.
“The importance of pumped hydro storage, and indeed reservoir hydropower, is likely to grow over time as the shift to a truly sustainable electricity sector accelerates, not just for the low-cost storage it provides, but for the flexibility it brings to integrate high levels of variable renewables at minimal cost,” the report says.
IRENA says there are many new ideas on how to expand worldwide pumped storage capacities, one of which includes installing wind turbines at existing pumped storage facilities to provide pumping power.
The topic of energy storage has gained prominence in recent years, IRENA says, and plays a key role in the design of modern electricity grids. IRENA says promising developments in other energy storage technologies may one day challenge pumped storage hydro’s near-monopoly on low-cost electricity storage. But for now, pumped hydro is still the only technology offering economically viable large-scale storage.
Gregory B. Poindexter is associate editor for Hydro Review.
HydroVision International connection
Are you seeking to learn even more about pumped storage? Look no further than HydroVision International, being held in Charlotte, N.C., U.S., June 26 to 28.
On Thursday, June 28, make sure you attend a couple of sessions on the topic:
4F: Pumped Storage: How to Make it Work. This session will look at specific examples where development and operation of pumped storage is valued and encouraged.
5D: Bold, Beautiful and Powerful: Case Studies of Large Conventional and Pumped Storage Projects. Learn how large plants have played a transformational role in their regions by eliminating poverty and providing large non-fossil-fuel-
dependent, reliable energy sources.
In addition, join us for the Grid-Scale Energy Storage Summit June 25 and 26 to explore the synergies between pumped storage hydro and renewables, such as wind and solar. This gathering provides the opportunity to strategize the next steps for working together to benefit both of these markets.