Pumped to be green

Brian Minhinick, Mott MacDonald, Australia, outlines the need for storage technologies in the energy transition, focusing specifically on pumped storage hydro.

With every stakeholder attached to the energy value chain seemingly seeking accelerated transitions to a net zero carbon future, energy suppliers and consumers around the world face unprecedented uncertainty and opportunity.

Decarbonisation of traditional liquid and gaseous fuels will continue to advance, but the initial ‘default’ response to decarbonisation is focused on green electrification solutions. This has created an insatiable demand for variable renewable energy (VRE) solutions, which require short-, medium- and long-term energy storage to maintain system stability and energy security when the sun does not shine, and the wind does not blow. The demand for energy storage is accentuated by the planned accelerated retirement of base load thermal plants.

This article explores the case for pumped storage hydro to meet the medium- to long-term storage system and market need, investigating its role in the generation mix and the benefits with regards to system security. It also explores the challenges governments and the private sector will need to navigate to realise pumped storage’s value stream in a net zero carbon future energy mix.

Thermal baseload power plants were historically constructed and operated to provide dispatchable power (when it was needed) at the lowest per unit cost

of energy. However, the accelerated adoption of VRE has significantly reduced the cost of solar photovoltaic (PV) and wind power, making both technologies cheaper than the short-run marginal cost of baseload coal. Pumped storage hydro can play a significant role in this transition. Paired with VRE, it can now compete on cost with new-build baseload power plants (such as supercritical coal) and provide a decarbonised and secure energy system solution for consumers.

Pumped storage hydropower is not new – it is a tried and trusted solution dating back more than 100 years. Reversible hydropower turbines pump water from a lower reservoir to an upper reservoir during periods of low energy demand (when energy prices are cheap), releasing it again to generate electricity when demand rises. Colloquially, this is referred to as a ‘water battery’.

Markets and power systems globally are currently adopting battery energy storage systems (BESS) at unprecedented rates. But, compared with pumped hydro storage solutions, BESS only solves VRE intermittency issues for relatively short durations. By contrast, pumped storage hydropower is currently the largest-capacity form of grid energy storage that is proven and available. The International Hydropower Association estimates that there are more than 130 pumped storage hydropower plants globally, which can store up to 9 TWh of electricity.

Figure 1. 250 MW Kidston hydro project landscape, North Queensland, Australia. Source: Genex Power.

Figure 2. 250 MW hydro project aerial view. Source: Genex Power. Originally, the economic driver for pumped storage was ‘energy arbitrage’ – storing energy during cheaper off-peak periods for use during peak periods, when prices are high. In a renewable energy system, pumped storage hydro can play additional roles such as regulating system voltage and responding to the intermittency of renewable energy sources (maintaining frequency) by providing dependable, flexible, fast-responding generating capacity to help stabilise low-carbon grids.

The business case for pumped storage hydro is strong. It is currently the only proven economic solution for bulk energy storage at utility scale. Further, the lifespan of pumped storage hydro is often several times longer than most BESS. The Kidston pumped storage hydro project under construction in Queensland, Australia, for example, has a projected lifespan of at least 80 years. When compared to BESS, many cycles of battery deployment would be required to come close to this duration.

Hydro storage facilities are also a generator of inertia. Power networks need inertia to ensure system security. The accelerated retirement of thermal power plants reduces system inertia, thus increasing the risk of system events, including blackouts. Pumped storage hydro provides a proven physical inertia to provide resistance to system frequency changes triggered by system generation and demand mismatches. It also offers better security or reliability of supply.

Supplies of coal, gas, and liquid fuels are often sensitive to geopolitical risks, whereas pumped storage is a dispatchable renewable energy source that is independent from the impacts of conventional fuel supply chain risks and market pricing. Pumped storage hydro is also considered ‘off-river’ – utilising or recycling essentially the same allocation of water – and means it is not susceptible to the water allocation and supply risks caused by climate change or other geopolitical risks that can affect conventional run of river hydro projects. Many existing hydro sites are already suitable for use as pumped storage hydro sites with minimal adjustment. The Australia National University (ANU) in its Global Pumped Hydro Energy Storage (PHES) Atlas estimates that there are 616 000 existing facilities with feasible potential to be turned into pumped storage hydro sites, with a storage potential of 23 million GWh. The wider societal benefits should also be recognised. Renewable technologies have the potential to promote economic development through job creation in construction, maintenance and operations, industry and supply chains, and indirectly in local commerce. For example,

the Chaglla hydropower dam Mott MacDonald helped work on in Peru saw the creation of 12 500 direct jobs and 10 000 indirect jobs and improved road access for rural communities. Pumped storage hydro backs up these renewable technologies while contributing itself to local economic development.

Pumped storage hydro solutions play a critical part in enabling a secure and cost-effective transition to a decarbonised energy future and helping governments and businesses achieve their net zero goals. Planning and incentivisation is required, and the pace of both needs to accelerate. Governments should start by incentivising and supporting the development of the industry and projects locally through grants, contracts for difference, and other support mechanisms.

This would help overcome some of the barriers to progress. For instance, much of the lifetime cost of pumped storage hydro is incurred during initial construction. Historically, governments or publicly owned organisations invested in pumped storage hydro because they were able to consider the whole-life benefits beyond the high initial CAPEX. In a market with high levels of energy privatisation and without long-term revenue certainty, investors are unwilling to invest in pumped storage hydro.

High upfront costs were initially also associated with wind and solar PV technologies, but these have successfully been implemented into energy markets, including private residences and small businesses, through policy interventions to support deployment. Without similar support for long-duration storage, it will become steadily more difficult to maintain grid reliability.

Revenue generation from pumped storage differs from solar and wind, however. Pumped hydro is always consistent in its output if there is water in the reservoir ready to pump.

More work needs to be done to assess the revenue of pumped hydro sites to encourage investment, and tools such as the International Hydropower Association’s (ISA) sustainability tools can be utilised as a regulatory aid to provide the assurances that many investors need.

There are also several government-supported revenue streams that other energy generation technologies can take advantage of that are not open to pumped hydro. In many markets, long storage solutions that are charged by renewable sources are treated the same as those charged

Figure 4. At the Kidston site, Australia, surplus energy will be stored using pumped hydropower, which can respond rapidly to meet spikes in demand or to cover short dips in solar or wind power output. by traditional carbon-generating infrastructure. This should be re-evaluated, and governments can and should encourage change through financial interventions. Policymakers should also assess the long-term storage needs of their future power system in the first instance, so that the opportunity to build more efficient options – including new hydro storage facilities or adapting existing hydro facilities into pumped storage hydro sites – is not lost. These policymakers have the power to support a technology that will prop up their markets and provide security for generations to come. If green recovery and ‘build back better’ initiatives are to be properly supported, pumped storage hydro should be a vital part of global grids, strengthening resilience in energy markets and meeting enshrined net zero targets. Without the necessary support, governments will open their markets up to the vulnerabilities associated with energy transition.

Figure 3. 50 MW solar project aerial view. Source: Genex Power.

Chris Poynter, President, ABB System Drives, Switzerland, emphasises how the entire value chain must be decarbonised in order to reach the world’s net zero goals, discussing how these alternatives need to be cost-effective, cleaner, and more sustainable in order to be viable solutions.