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Feature Story | Argonne National Laboratory

The value of water power

A conversation between Argonne, the Department of Energy and Rye Development on how pumped storage hydropower may help our nation achieve a clean energy future.

To combat climate change, the United States has set ambitious goals toward a clean energy, carbon-free future. Hydropower — one of humankind’s oldest power sources — will be critical to meeting those goals. Pumped storage hydropower (PSH) accounts for about 93% of all U.S. energy storage capacity, and a new valuation guide is helping developers, plant owners and other stakeholders capture all the aspects of a PSH project from potential revenue streams, to benefits, to costs.

In a recent conversation hosted on the Instagram channel of the U.S. Department of Energy’s (DOE) Argonne National Laboratory, three guests discuss the value of hydropower to the future of energy, opportunities and challenges ahead for hydropower and its connection to the future electric grid, and how utilities can use the PSH valuation guide as they evaluate new investments.

The conversation includes hydropower engineer Katie Jackson from DOE’s Water Power Technologies Office, Vladimir Koritarov, director of the Center for Energy, Environmental, and Economic Systems Analysis (CEEESA) at Argonne, and Erik Steimle, vice president of Project Development at Rye Development.

You can watch our video interview with Koritarov on Argonne’s Instagram or Youtube.

Q: What does the Pumped Storage Hydropower Valuation Guidebook seek to achieve?

Jackson: Everybody knows the Biden administration has set the goal to build a 100% clean energy power sector by 2035 and to reach net-zero carbon emissions by no later than 2050. Hydropower and pumped storage hydropower are, and will, continue to be key tools for reaching those clean energy goals. This includes strengthening our existing facilities and a need to build new PSH with these high renewable penetrations on the horizon.

So as part of DOE’s HydroWIRES (Water Innovation for a Resilient Electricity System) Initiative, the objective of this Pumped Storage Hydropower Valuation Guidebook project was to develop a detailed step-by-step guidance that PSH developers, plant owners or other stakeholders could use to assess the value of an existing or potential new PSH plant and their services. Specifically, we wanted to develop this valuation guidance to support consistency across PSH project comparisons and project designs, test the guidance by applying it to two selected PSH projects, and then disseminate this PSH valuation guidance to the hydropower industry and beyond.

Q: What is the HydroWIRES Initiative and what’s included in this portfolio?

Jackson: Hydropower is used extensively in the power system for flexibility and resilience and pumped storage hydropower represents about 93% of our U.S. grid storage today. It’s clear that hydro and PSH will be critical contributors moving forward for decarbonization.

In response, the Department of Energy’s Water Power Technologies Office (WPTO) in 2019 launched HydroWIRES in order to understand, enable and improve hydropower’s contributions to reliability, resilience and integration in the rapidly evolving U.S. electricity system.

The research in HydroWIRES covers understanding the value under evolving system conditions. We also look at capabilities and constraints, operations and planning, and tech innovation. We’ve done a prize competition that was the Further Advancements to Shorten Time (FAST) commissioning for pumped storage hydropower and it invited external innovators to research ideas that can make it faster to deploy these PSH technologies.

We’re also working on a life cycle assessment to understand the environmental impacts over the entire lifespan of a PSH facility. We have partnerships with external entities like GE, EPRI and Missouri Science and Technology to improve modeling. We’re also active members and our assistant secretary, Kelly Speakes-Backman, is also the co-chair for the International Pumped Storage Forum. The forum brings together governments, industry, financial institutions, academia, NGOs… everybody from around the world to develop guidance and recommendations on how sustainable PSH can best support the energy transition.

Q: What is energy storage and what other types of energy storage are there?

Koritarov: Energy storage are devices and technologies that help us store energy at some time and use it at some other time when that energy is more needed or more valuable. They include different types of batteries, flywheels, compressed air energy storage, pumped storage, different types of thermal energy storage, ultra-capacitors and so on.

The value of the energy that they produce typically exceeds the value of energy that is being stored. So they store energy when it’s either inexpensive or there is a surplus generation that needs to be stored and then they produce electricity once that energy is needed by the system, for example, when we have the peak load, or when the energy prices are very high so that the value of energy is greater.

All these different types of energy storage devices have some useful applications in electric power systems.  Some of these devices have larger energy density and larger capacities, while others are very quick in responding and can be used to regulate the system and respond to the frequency deviations.

So different technologies can store energy and they are basically not competing with each other. In principle we need all different types of energy storage technologies because for all them there is some use in the power system.

 Q: You led the development of the Pumped Storage Hydropower Valuation Guidebook. Who is the audience for this guide and why do we need a guide?

Koritarov: Pumped storage projects provide many different services and for some of these services the value is difficult to estimate. So the value of the PSH project itself is basically estimated through the valuation of different services and contributions that it can provide to the grid. Since we have probably dozens of different services that these projects provide to the grid, the question is how do you evaluate those services? How do we estimate the value of each individual service and add them all together?

What we did was to develop a guidebook which will establish a valuation process that’s transparent, comprehensive and objective so that people can actually apply it for a valuation of pumped storage projects and make sure that they have captured all the aspects of the project, all the potential revenue streams, all the potential benefits, as well as the costs of the project.

We developed a cost benefit and decision analysis framework that will be serving as the core for the valuation process for the pumped storage projects and tell us whether the project is economically viable or not. We also added the multi-criteria decision analysis which is an approach that helps the analysts analyze different alternatives of the project.

So if you look into potential different designs or different sizes of the project, different capacities, different number of units, configurations and so on, you may have different alternatives which you want to evaluate. That is something that the multi-criteria decision analysis can help with because it can compare different alternatives, parameters, attributes and more.

Q: There are 90,000 dams in the country but only 3% of them generate power. From the perspective of someone like yourself who develops power, what are the opportunities in the development of hydropower?

Steimle: There’s a great opportunity in retrofitting existing dams with new hydropower facilities. We have a long history of constructing dams for flood control, navigation, irrigation and other purposes. There are large portions of the U.S. that have relied on coal or other sources of generation that can now look to these existing resources to capture a range of flows already being released to manage transportation or flood control and put electricity onto the grid.

Second, we’re seeing a lot of growth opportunity in areas of the U.S that are adding a lot of new wind and solar, also coupled with coal decommissioning and now even some thermal constraints. These areas are seeing capacity challenges where hydro pumped storage is a tried-and-true, low-cost, solution with a lot of examples across the globe to point to.

In addition, we’re seeing utilities now have to look at a full sort of 24/7 picture of demands including electric transportation demands as our electric grid in both individual and mass transit is going to become more and more linked with the electrical grid here in the next 10 years or so.

Q: What is one thing that makes Pumped Storage Hydropower Valuation Guidebook indispensable as your company thinks about those new investments?

Steimle: As a developer really we’re trying to be just ahead of market conditions that will really deliver meaningful value for our projects and allow us to put metal into the ground. As I described previously, this has kind of been a niche market where popular demand or policy is dictating a high amount of renewable penetration. However, utilities across the U.S. are now planning for a low-carbon future and this guidebook is a really useful tool for planners, utility commissioners and others who are now needing to consider what their low-cost storage capacity resource options could be.

And of course, this tool is provided by a trusted third-party independent body so it’s going to be extremely valuable now that large portions, if not all, of the U.S. are looking at what tools they might have and certainly pumped storage is a low-cost equitable resource if you’re looking at storage options.

Q: As opposed to wind and solar, it may take up to five years to get a permit to build a new PSH facility. Why does it take this long and why may the time spent actually be a good thing? 

Steimle: The permitting process with hydro is governed by the Federal Energy Regulatory Commission and this is a legacy process. A process that was well in place before most anyone envisioned any large-scale wind or solar or some of the other technologies that we’re talking about coming under the grid. So to a large extent the permitting process is longer and there isn’t a lot of parity between other renewables and hydro.

That said, this multitiered, multiyear process involves an incredible amount of public oversight, agency and tribal consultation. So at the end when you’re actually issued a license to construct and operate a facility like a closed pump storage facility, you’re ensuring you have a project that’s a community asset because it’s taken years to really shape what the footprint and overall benefits of the project will be.

So from my standpoint that’s one of the benefits of a somewhat long and arduous permitting process.

Q: Considering that the electric grid is currently in a grand transition, and knowing that pumped storage hydropower takes about five to six years from idea to execution, what are some key milestones we need to hit in order to ramp up this capability?

Steimle: So far the milestones are pretty fragmented across the U.S. because we’re not approaching this in a unilateral way.

It’s based on regional demand and regional policy. In some cases, even very local policy and demand. Where we’re seeing pumped storage have a really good fit and where we need to be thinking ahead is in areas where renewables are exceeding 50% of the actual electricity portfolio. And where areas in the grid are utilizing, or at least forecasting, a lot of additional wind and solar on the system as a large portion of their new portfolio.

That’s where we’re seeing potential capacity issues where there’s needed flexibility in the system on providing reliable electricity to the grid. It’s also where we’re seeing this capacity credit, if you will, or the credit around storage being something that’s long duration. So a type of storage that’s 6 to 9 hours, sometimes longer, but somewhere in that range is where pumped storage really is very effective, certainly a lower cost tool. Not just for utilities, but lower cost means a great deal to rate payers across the United States.

This conversation was edited for length and clarity. The full conversation is available on Argonne’s Instagram channel.

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