Pumped Storage Needs Technology-Neutral Government Policies

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Pumped Storage Needs Technology-Neutral Government Policies

DATE:

June 1, 2021

BY:

Cameron Schilling, Vice President, Market Strategies and Regulatory Affairs, NHA

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Pumped Storage Needs Technology-Neutral Government Policies

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The International Forum on Pumped Storage Hydropower, co-led by the International Hydropower Association and the U.S. Department of Energy (DOE), began its second meeting on May 25, 2021, by hearing from high-level policy makers across the globe, including DOE Secretary Jennifer Granholm. 

During the forum, Granholm clearly stated that the Biden Administration believes pumped storage hydro is vital to meeting the 100% zero carbon grid goal by 2035. The reality, though, is pumped storage hydro only can be fully leveraged to balance a decarbonized grid if governments implement smart energy policies and level the playing field for all technologies. 

Launched in 2020, the Forum provides a way for developers, suppliers, policy-makers, financial entities and other stakeholders to share and collaborate on ways pumped-storage technology can be leveraged to meet the challenges of climate change. 

5 TAKEAWAYS FROM THE MAY 25, 2021, MEETING

1) The Biden Administration believes pumped storage hydro is vital to meeting the 100% zero carbon grid goal by 2035 goal. 

Both Secretary Granholm and Deputy Assistant Secretary Kelly Speakes-Backman reiterated the Biden Administration’s support for pumped storage.  

Secretary Granholm described the technology as one of our “most trusted tools in our clean energy toolbox.”  

Speakes-Backman, who leads the renewable office at DOE, also spoke about pumped storage hydro’s role within the Administration. In her remarks she said, “pumped storage hydropower can and will continue to play a crucial role in our fight against climate change.” She also reiterated DOE’s support, through grants, programs and research at national labs to moving forward technological innovation in the pumped hydro industry.  

2) Pumped Storage Hydro is seeing record amounts of interest and development, but only being built in certain countries with strong government backing.

Pumped storage hydro is experiencing a renaissance of interest, as the value of long-duration storage becomes more apparent. 

In the United States, over 55 GW (almost three times the existing pumped-storage fleet) of pumped storage hydro are under some form of development. 

In East Asia, over 104 GW of pumped storage hydro projects are being developed. Countries like India are increasingly looking to the technology to accommodate vast amounts of solar resources.  

However, breaking ground on these projects is another story.  

Actual pumped storage hydro construction is only occurring in countries who have utilized government financing or strong regulatory requirements to build new storage facilities. These countries include Australia, China, several countries in Europe, Israel, Morocco, and Egypt. 

DOE U.S. Hydropower Market Report, Page 17

3) Barriers to Pumped Storage Hydro development are similar around the globe.

Despite vastly different regulatory and market structures, pumped storage developers around the globe are facing some of the same challenges and barriers.  

First, there is a lack of comprehensive compensation for all of pumped storage hydro’s value to the grid (flexibility, frequency response, stability, wind/solar integration and capacity).  

Second, there is a lack of technology-neutral targets for grid-scale storage. Most storage targets are designed to favor shorter duration batteries.  

Third, there is great uncertainty in long-term electricity, ancillary service and capacity prices.  

Fourth, lengthy permitting and development timelines preclude pumped storage hydro from competing in procurement processes with shorter time horizons.

4) A number of common misconceptions exist about pumped storage hydro

Whether its costs, new development potential or comparison to other technologies, the PSH industry must do a better job at combatting commonly held misconceptions about the technology. These include misconceptions about costs, potential, land / space requirements, and how pumped storage compares to chemical batteries. 

5) With a level playing field and smart government policies, pumped storage hydro can be fully leveraged to balance a decarbonized grid.

Pumped storage hydro is the least-cost option for all large, long-duration storage applications. In fact, pumped storage hydro capacity in the U.S. has grown by nearly as much as all other storage types combined, in part because it is recognized by current asset owners for its immense value.  

However, new development can only occur if policy-makers design policies to allow all storage applications to compete. For instance, in the U.S., most storage targets do not allow for enough lead time for pumped storage hydro development. Also, the current tax code provides a 30% investment tax credit to certain storage technologies but leaves out pumped storage hydro. And wholesale markets need to evolve to value all the services from pumped storage hydro (including stability, curtailment avoidance, and transmission services).