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Interest in new US pumped storage hydro-electric projects ramped
up over the past few weeks, even as the substantial upfront costs -
especially compared with new kid on the block battery-based storage
- remain an inhibiter.
In November, the US Department of Energy (DOE) launched an
initiative alongside the International Hydropower Association (IHA)
- with the support of 10 other nations - to overcome the barriers
faced by the technology, which currently accounts for more than 94%
of installed energy storage capacity, according to the
alliance.
An added boost came later in November with backing for projects
in the US Pacific Northwest, a region that had already seen support
for pumped storage in 2020, with the possibility of a regulated
utility - a concept that involves state-level authorities approving
generation and transmission spending plans and strategies -
including one or more new projects in its future.
The 43 pumped storage projects operating in the US provide
around 23 GW of support. A pumped storage project would typically
be designed to have six to 20 hours of hydraulic reservoir storage
— a requirement that until recently, as the output of
intermittent renewable generation soared across the US and globe,
was seen to have less value.
However, the last time a pumped storage project with more than
50 MW capacity came online in the US was in 2002, according to US
Energy Information Administration data. In stark contrast,
according to the US Energy Storage Association, the US battery
energy storage market is set to grow from 1.2 GW in 2020 to nearly
7.5 GW in 2025, driven primarily by large-scale utility
procurements. Solar-paired storage will account
for a large majority of these installations, it added.
The initiative, the International
Forum on Pumped Storage Hydropower (PSH), will develop policy
proposals and exchange knowledge on the technical and market
reforms necessary to overcome barriers to sustainable PSH projects,
according to its backers.
The governments of the US, Austria, Brazil, Estonia, Greece,
India, Indonesia, Israel, Morocco, Norway and Switzerland signed
up.
"With this initiative we have an opportunity to help ensure that
[PSH] will play an important role in our power systems today and
into the future," Daniel Simmons, assistant secretary for DOE's
Office of Energy Efficiency and Renewable Energy, said when the
initiative was announced.
"Several developers have plans to build new [PSH] plants in the
United States, and we hope the work of this forum will help them
get those plants built, to help make the grid of the future more
reliable and robust," he added.
The forum's partners' goals in the coming year are to exchange
information about best practices for new construction and improving
the sustainability and efficiency of existing facilities, said
Eddie Rich, IHA CEO.
"[PSH] is the only renewable option that can currently produce
commercially viable balancing power to integrate variable renewable
technologies at-scale," World Bank Global Director of Energy and
Extractives Demetrios Papathanasiou said, adding: "The potential
for pumped storage appears to be enormous. We have plenty of sites
in Africa, Asia, and Latin America … the challenge is in
identifying the right sites, connecting them with the grid and
using them as best we can in planning for the clean energy
transition."
"The International Renewable Energy Agency (IRENA) has stated
that [PSH] hydropower, which provides most of the world's energy
storage capacity, needs to nearly double by 2050 to meet ambitious
global climate targets. The good news is that there is massive
potential, including over 600,000 potential off-river sites that
have recently been identified, plus opportunities for modernizing
existing plants," noted Rich.
Three working groups have been formed: Policy and Market
Frameworks; Sustainability; Capabilities, Costs and Innovation.
"A recent EU study shows that PSH is by far the main energy
storage reservoir in Europe. However, the future looks uncertain
and the study recognizes that PSH faces regulatory and market
barriers. We see a key role for this forum as raising awareness
with policymakers about the benefits of hydropower and PSH," Benoit
Revaz, State Secretary and Director, Swiss Federal Office of
Energy, said.
Rich's trade association also upped the ante in November by
publishing a consultation paper on the development of a global
sustainability standard for hydropower. If adopted, the Hydropower
Sustainability Standard would apply a rating, or label, to projects
of any size or stage of development. This would incentivize and
recognize responsible project developers, and help investors,
governments and communities understand which schemes meet
international environmental, social and governance (ESG)
performance requirements.
Attracting investment
In DOE's own backyard, the sector received another boost in the
middle of November.
Copenhagen Infrastructure Partners (CIP) announced it had
acquired ownership of the Swan Lake and Goldendale closed-loop
pumped storage projects in Klamath County, Oregon, and Klickitat
County, Washington, respectively. The projects were previously
owned and in development by a joint venture between Rye Development
and UK-based National Grid.
CIP is a Danish fund manager with seven energy infrastructure
funds and more than Eur12 billion ($14.5 billion) under
management.
"At CIP, we focus on teaming with leading developers and making
investments in energy infrastructure assets with a high degree of
stability in cash flows," said Christian Skakkebæk, senior partner.
"With the long investment horizon of our funds, it enables us to
participate in large projects overseeing contracting, de-risking,
financing, construction and operation. [PSH] is a unique and
valuable asset class that will be a key resource as the global
transition to renewable energy continues to accelerate in states
such as Oregon, Washington and Montana."
Rye will continue to lead development of the two projects until
the start of construction. Rye has a current pipeline of at least
22 projects in eight states, it said.
Swan Lake has a 400 MW capacity and construction is expected to
begin in 2021 or 2022. The project is scheduled to enter service in
2025. It received a 50-year construction and operating license from
FERC in April 2019.
However, the launch of the alliance came too late for a project
being developed in Montana.
TD Energy Park LLC on 9 November 2021 notified the US Federal
Energy Regulatory Commission (FERC) it had decided not to proceed
with licensing of the Two Dot Butte project.
The company cited land ownership issues and unspecified "market
concerns" as the reasons for axing the project. FERC in January
2018 granted the company a preliminary permit that allowed it to
conduct project feasibility work ahead of any license application.
The company did not respond to multiple requests for further
comment.
The company's Gordon Butte, Banner Mountain and Agate projects
are unaffected by the filing with FERC, a source close to the
situation said. The about 400-MW Gordon Butte project involves a
closed-loop system in central Montana. It has state-level backing,
with Governor Steve Bullock saying: "The Gordon Butte Project
represents Montana taking a leadership role in defining the
nation's energy future. This state-of-the-art facility provides an
incredible opportunity to preserve our natural legacy while
creating jobs where they are most needed."
Also on the FERC docket is a preliminary permit for Daybreak
Energy's proposed $3.6 billion Navajo Energy Storage Station, a
2.21-GW storage facility on Navajo Nation lands near the south
shore of Lake Powell.
Daybreak CEO Jim Day told IHS Markit in November he was
expecting an answer from the regulator on a preliminary permit
shortly. FERC approved Daybreak's application for the permit in
February 2020. The facility near the Arizona-Utah border would use
energy produced from solar and wind facilities in the desert
Southwest to pump water to a reservoir on the Cummins Plateau above
the lake, offering 10 hours of dispatchable energy.
Alongside that Daybreak's proposed Next Generation Pumped
Storage facility is a 1.54-GW facility about five miles from the
Hoover Dam in Arizona. The project would also use solar and wind
power, pumping water from Lake Mead to a new reservoir at the top
of the nearby Fortification Hill, according to the company.
Inclusion in rate base?
Observers argue that power purchase agreements or projects being
built into a utility's rate base are options for overcoming the
substantial initial costs in the US.
To that end, in July, Berkshire Hathaway Energy's PacifiCorp
unit issued an all-source request for proposals (RFP) that offered
more favorable terms for what it termed "long-lead projects,
including pumped storage facilities."
The largest RFP in the regulated utility, transmission and
generation owner's history will offer the option of a later start
of commercial operation for such projects than will be allowed for
alternative resources. Berkshire Hathaway Energy is an arm of the
Berkshire Hathaway conglomerate controlled by renowned investor
Warren Buffett.
PacifiCorp's most recent Integrated Resource Plan laid out plans
to add 1.823 GW of extra solar resources, 595 MW of new battery
energy storage and 1.920 GW of new wind resources by the end of
2023 — enough, it said, to power more than 1.1 million typical
homes with renewable energy.