Get pumped: Leveraging flexibility from pumped storage

Flexibility opportunities with pumped storage

Hydropower has been in use since ancient times and was a key technology in enabling the early industrial revolution. The world’s first pumped storage facility went into operation in Switzerland in the early 20th century. Since then, pumped hydroelectric storage has become a critical part of our energy supply, providing crucial flexibility demanded by our modern power system. Although at 158 GW, it only accounts for a small fraction of total global installed power capacity, it represents the vast majority of power storage capacity and will continue to do so for some time to come. What opportunities does this flexibility present for operators, and how can they make the most of it?

The basic principles of pumped hydropower plants are simple: At times of low demand, cheap power (sometimes even with a negative price) is used to pump water up to a reservoir at a higher elevation, where energy is stored in the form of the gravitational potential. When demand (and prices) rise, the water is released to flow down through turbines to generate electricity. The flexibility provided by storage capacity thereby enables plant operators to profit from the difference in price. Although there are some losses from this process, it is a cost-effective means of energy storage and one of the cleanest tools to balance renewable fluctuations. Energy recovery is around 70-80%, and these losses must be covered by the price spreads between pumping and generation.

The flexibility offered by pumped hydropower storage has become increasingly important with the energy transition: It’s an efficient way to balance variable renewables and store excess power when wind or solar generation is high. In regions where thermal power plants still provide the majority of the base-load power, pumped storage helps flatten out load variations on the power grid, delivering power to fill the peaks or consume energy when demand falls short. Extremely short lead times allow quick reaction for both positive and negative flexibility.

Types of pumped hydropower storage

The flexibility provided by a pumped storage plant depends on the amount of water and the relative height between top and bottom reservoirs. But not all systems are made equal. A variety of pump and generator setups (combined bidirectional pump generators, discrete pumps, generators with flexible or fixed capacity) provide varying degrees of positive and negative flexibility.

Pumped storage systems also vary in terms of physical configuration. In open-loop systems, which represent about 70% of the roughly 180 pumped hydro stations in Europe today, one or both reservoirs are fed with free-flowing water.

Closed-loop systems, on the other hand, are not continuously connected to flowing water (only for the initial filling and occasional refilling due to evaporation). As a result, they have fewer environmental impacts. Because the geographic constraints are reduced, this concept widens the field of available sites; they can more easily be located near areas of high demand or even close to wind and solar farms to store their excess generation, reducing grid-related curtailment.

The concept of underground systems located in abandoned mines or caverns has also been proposed, and several projects are in the early stages of development. These have the advantage of lower impact on vegetation and wildlife and less need for relocations, which extends the elegibility of potential locations, especially in flat regions.

Finally, pumped storage plants have differing storage cycles. Many run on daily cycles, taking advantage of spreads in day and night power prices. Meanwhile, plants capable of more frequent cycles, such as hourly, can contribute greatly to balancing short-term grid fluctuations and are well suited for intraday trading. Seasonal pumped storage is a relatively new concept, which balances seasonal variations in rainfall, wind, and solar generation. This is most suitable for larger plants with large storage capacities.

Marketing your pumped storage flexibility

There are several different markets where you can market flexibility from your pumped storage. The most well-known are balancing markets, which were created to provide grid stability through flexibility. They have traditionally been the main avenue for marketing pumped storage, but they are run directly by the TSOs (Transmission System Operators), based on rigid, complex rules with high entry barriers. Pricing is influenced by a few large market participants. Finally, it requires giving the TSO considerable control over your plant: You commit to having a certain capacity available, and the TSO decides on short notice whether or not it’s needed.

Day-ahead auctions (and more recently in some locations intraday auctions) are also a possibility. However, their longer lead times compared to other short-term markets mean that they don’t really address the very short-term flexibility issues that are prevalent in today’s power systems.

The most promising option for commercialization is the continuous intraday market, which allows you to take advantage of price fluctuations, as buying and selling energy is possible up until just minutes before the physical delivery. Trades are executed on an organized exchange with friendlier rules and lower entry barriers. The intraday continuous market also gives you more freedom: You can change your mind at any time, and if market conditions become less favorable, you can trade back a position you previously logged. All in all, the intraday continuous market offers the most favorable opportunities for flexibility marketing, but entering it is tricky. Increased volume and volatility, an ever-growing number of products, and the move to trading in near real-time make it extremely challenging for manual traders to succeed. To keep up with the competition, fully automated and data-based commercial optimization are key.

Do you want to maximize the profitability of your flexibility?