By Rick Miller, P.E., Senior Vice President, Hydropower Division, HDR | DTA

Pumped storage hydroelectric projects have been providing valuable storage capacity, transmission grid ancillary benefits and renewable energy in the United States and Europe since the 1920s.

The 40 pumped storage projects operating in the U.S. today provide more than 20 GW, or nearly 2 percent, of capacity for our nation’s energy supply system, according to the Energy Information Administration (EIA). Combined, pumped storage and conventional hydroelectric plants account for 77 percent of our nation’s renewable energy capacity, with pumped storage alone accounting for approximately 16 percent of our renewable capacity.

Duke Energy’s 610 MW Jocassee project in South Carolina is in the midst of a rehabilitation that will increase total capacity by 50 MW.

Pumped storage contributions to our nation’s transmission grid—providing stable services, meeting storage capacity needs and expanding the green job market—are already considerable.

But what role can pumped storage play in the future of a nation with rapidly growing needs for storage capacity and carbon-free power? How can it aid an economic recovery spurred by investment in renewable energy technology and associated jobs? With the American Recovery and Reinvestment Act of 2009 and evolving state and federal renewable portfolio standards as catalysts, and given the accompanying legislative and regulatory policy support for investment in this technology, opportunities for pumped storage to play a key role are significant.

Pumped Storage Hydro Defined

Pumped storage is a type of hydroelectric power generation that stores energy in the form of water in an upper reservoir, pumped from a second reservoir at a lower elevation. During periods of high electricity demand, the stored water is released through turbines in the same manner as a conventional hydro station. Excess energy, usually at lower cost on nights and weekends, is used to recharge the reservoir by pumping the water back to the upper reservoir. Reversible pump/turbine and generator/motor assemblies act as both a pump and a turbine.

Pumped storage stations differ from traditional hydro stations in that they are a net consumer of electricity. In reality, pumped storage plants can be considered transmission facilities. They can be economical from an overall system operation perspective due to peak/off-peak price differentials and, more importantly, the provision of ancillary grid services.

A 150-ton pump turbine runner is transported to the Jocassee powerhouse. Photo courtesy HDR|DTA.

Pumped storage historically has been used to balance load on a system and allow large, thermal generating sources to operate at optimum conditions. It is the largest-capacity and most cost-effective form of grid energy storage currently available. Pumped storage stations also provide ancillary electrical grid services such as network frequency control and critical system reserves. This is due to the ability of pumped storage plants, like other hydroelectric plants, to respond to load changes within seconds.

Pumped storage is now being applied to firm the variability of renewable power sources such as wind and solar generation. It can absorb excess generation (or negative load) at times of high output and low demand. It can also release that stored energy during peak demand periods, proving to be an enabling technology for wind power’s growing penetration into the U.S. energy supply system.

The Need for Energy Storage

Pumped storage hydro has provided significant benefits since its inception, including storage, load balancing, frequency control and reserve generation. Compressed air energy storage (CAES) also provides bulk storage, but currently there is only one installation in the U.S. with others under development or consideration. In contrast to these bulk storage technologies, batteries, flywheels, super capacitors—which are all receiving considerable development attention and growth—function best when applied closest to the end-user at load centers, substations and even behind the consumer’s meter.

Increasing bulk energy storage capacity has not been a priority of utility planners or energy legislation in recent decades. Since many utilities deregulated in the 1990s, the industry has had no mechanism or incentive for coordinated integration of new generation, storage and transmission. Yet these three components of a reliable energy generation and transmission system require coordinated long-term planning. Because of this disconnect, new renewable energy projects have been unable to move forward due to lack of transmission capacity. Too, adding large amounts of variable generation in certain market regions that are not equipped to provide the load balancing required to accommodate them is creating havoc with both the transmission system and grid operators. These experienced operators have significant history managing the variability of changing load and, until recently, had the capacity and flexible energy options available to meet changing demand.

Despite these technical hurdles, the demand for additional renewable generation continues to grow. Over the past decade, 29 states have enacted renewable portfolio standards (RPS) requiring that renewable sources represent a certain percentage of new generation being brought on line. Climate policy initiatives are also driving investment in renewable sources. This has created a framework for rapid growth in intermittent generation such as wind and solar. But there has not been sufficient capacity or transmission planning to fully capture the benefits of these expanding energy resources. The result is that in areas such as Texas, California and the Pacific Northwest there is excess energy from wind without enough corresponding demand when the electricity is available (typically at night). Alternatively, there is not enough peaking power supply to provide on-demand capacity when the wind and solar plants cannot generate enough.

Many advocates of increased renewable generation point to Denmark as the example for integrating large amounts of variable generation. As a member of NORDPOOL (the Nordic Transmission System Operator), Denmark is not a balancing authority and can import/export its reserves as needed from Norway or Sweden. The point to note is that the Danish power system works because it is interconnected to Germany, Norway and Sweden which, with their pumped storage and hydropower-supplied grids, are generally able to accommodate power surges during high-wind periods and can send energy back to Denmark during low-wind periods.

Several studies have documented how bulk-storage capacity can support the increasing development of wind integration. These analyses show that not only does bulk storage add capacity and offer load balancing, it also reduces the cost of wind integration. For example, a wind integration study conducted for the Public Service Company of Colorado in 2006 reported that doubling the pumped storage capacity within its system could reduce integration costs by as much as $1.30/MWh in a 20 percent wind penetration case analysis.

Similarly, the Northwest Wind Integration Action Plan (Northwest Power and Conservation Council 2007) acknowledges that increased development of wind energy in the region requires a corresponding increase in flexible generation, including pumped storage. The plan notes that the cost of wind integration depends upon several factors including the availability of flexible sources within the region’s system and calls for the Northwest Wind Integration Forum to “characterize options for augmenting system flexibility” including options for storage technologies.

With the emergence of new renewable technologies and the ever-increasing investment in variable generation sources including wind and soar, the need for storage has never been greater.

Opportunities for Pumped Storage

In response to the growing need for storage and the exceptional synergy between pumped storage and variable renewable energy sources such as wind and solar, the hydro industry is proposing to more than double the pumped storage capacity in the near future. The Federal Energy Regulatory Commission (FERC) has recently issued 23 preliminary permits for new pumped storage hydro projects, representing approximately 15 GW of new pumped storage capacity. Another 15 applications for preliminary permits pending before FERC could provide an additional 16 GW of capacity.

These new developments are across the western U.S. where new development of variable generation sources, including wind and solar, is occurring at a rate that is challenging the existing transmission system’s ability to manage the variability of these sources.

How significant is the 15 to 31 GW of proposed pumped storage capacity? The U.S. Department of Energy (DOE) recently projected that to meet a national goal of obtaining 20 percent of our electricity from wind generation by 2030, utilities must integrate some 300 GW of wind generation onto the grid. To accommodate this new wind generation, an estimated 50 GW of new peaking generation—probably from natural gas—would be needed. However, new generation is not the only way to address this need. In its December 2008 report to the DOE, the Electricity Advisory Committee recommended using storage to provide some of this capacity rather than new generation sources.

With its current proposals, the pumped storage sector of the hydropower industry is poised to fulfill an estimated 30 percent to 60 percent of the storage capacity needed to meet the national 20 percent wind initiative. This would reduce the need for additional fossil-fuel-derived peaking generation and avoid the greenhouse gas emissions associated with those resources. Importantly, directing our new energy infrastructure investments to storage facilities that would be used at or near capacity—while also providing many ancillary benefits—would replace investing in large fossil-fuel generation sources that operate only a fraction of the time.

Achieving the Potential

Pumped storage is the only viable, large-scale resource that is broadly used today for storing energy and it offers the best option available for harnessing off-peak generation from renewable sources. Given the growing investment in variable generation sources, energy storage will be a critical tool for using our clean energy resources effectively.

The 31 GW of new pumped-storage project proposals now before FERC demonstrate the hydropower industry’s commitment to supporting other renewable sources. However, developers still face an uncertain investment climate and long development timelines. These issues must be addressed to ensure an investment climate that facilitates permitting and construction of these new pumped storage plants.

Federal policies that encourage investment and stabilize the development process are needed. Although Energy Secretary Steven Chu has said pumped storage technology must play an integral role in our plan to expand clean energy resources and integrate variable renewable energy resources into the transmission grid, the federal government currently has no program to spur pumped-storage development. Incentives are needed that attract investors and encourage rapid development of new pumped storage projects.

Providing investment tax credits and other mechanisms that reward investment in pumped storage and create a more stable investment environment will be critical. Policies that promote intergovernmental cooperation and streamline the permitting and licensing process will also add more certainty to pumped storage development and encourage growth.

The American Recovery and Reinvestment Act of 2009 has set the stage for new investment in renewable energy through investment tax credits, production tax credits, clean renewable energy bonds, grants and DOE research funding for renewable energy projects. Although these incentives do not work well for pumped storage, they will encourage rapid investment in other sources, including wind and solar, that require the capacity and load balancing that pumped storage offers.

The U.S. hydropower industry can show a direct link between tax incentives and the jobs and investment it continues to create. Since incremental hydropower projects first qualified for production tax credits under the Energy Policy Act of 2005, members of the National Hydropower Association report their development work has increased from between 25 percent to 50 percent. That increase has translated to high-quality, long-term jobs in all regions of the U.S. If the incentives that spurred this growth in conventional incremental hydropower were applied to pumped storage, the economics would justify the investments needed to move these projects ahead and the additional growth in these clean energy jobs would be equally significant.

Enhancing and updating America’s energy transmission infrastructure offers many benefits that address some of our most pressing priorities. Transmission development can provide jobs, create new businesses and improve the security of this critical national resource.

An enhanced transmission system will also accommodate new technologies, ensure electric reliability and offer efficiencies that maximize energy use and minimize environmental impact. Given pumped storage hydropower’s ability to serve and support the transmission system—and its role as an enabler of greater penetration of variable renewable generation—the U.S. hydropower industry and our nation needs sound policies that provide for growth in energy storage. The electric power system is a real-time system that must continuously balance supply and demand. Pumped storage projects are a proven technology to store excess energy at night and utilize that excess energy during the peak hours of the day when it is most needed. This ability to time-shift variable generation sources and relieve transmission congestion by providing critical load balancing services is an essential component of an enhanced transmission grid.

The Energy Storage Council (ESC) identified a number of steps that are needed to encourage development of new energy storage technologies and construction of energy storage. These include treating energy storage facilities and services on a comparable basis to traditional transmission facilities expansion for purposes of qualifying for transmission pricing incentives and participation in transmission planning processes. The ESC also advocated establishing a “safe harbor” for transmission owner pass through of costs associated with contracting for energy storage services that enhance transmission system capacity, reliability and security and for investing in energy storage services that enhance constrained transmission systems or substitute for investment in upgrading them. Although the Energy Policy Act of 2005 recognized pumped storage as a transmission enhancement, FERC should also consider allowing pumped storage to qualify as transmission facilities for purposes of determining eligibility for future incentives.

Expanding current investment and production tax credits, creating an energy storage credit and developing policies that allow pumped storage systems to qualify for transmission rate incentives currently afforded to transmission system upgrades and expansions would create the investment environment needed to encourage growth in pumped storage. This growth would displace the need for additional fossil fuel-based peaking generation and provide the load management capacity necessary to meet our national renewable energy goals.

Author: Richard R. Miller is a senior vice president with HDR|DTA, responsible for the firm’s hydropower services practice. A civil engineer with diversified experience in water resources, hydroelectric and pumped storage plant operations and engineering, he has 30 years of experience in the electric power industry. Miller was president of the National Hydropower Association from 2008-2009. He has also been an advisor to the Department of Energy regarding wind/pumped storage integration and energy storage market requirements.