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Pumped storage gets a boost (or two) in the US
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.
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.
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