The value of pumped hydro storage in a decarbonized world

Abstract

Countries around the world have pledged to decarbonize their electricity sector in order to address climate change. In this thesis we investigate the role of pumped hydro storage (PHS) in decarbonizing power generation in combination with a high penetration of low-carbon energy sources. PHS is the oldest storage technology and constitutes of 95 percent of storage capacity worldwide. We provide a technical and historical overview of PHS while noting assumptions about locational availability and environmental concerns that have progressed over the last several decades. This thesis uses a high PHS capacity country, Spain, as its case study First, this thesis establishes how PHS operates in a competitive wholesale market, confirming its use of daily arbitrage. Secondly, it shows the degree to which PHS effects the operation of other technology like nuclear, wind, and solar PV and its impact on greenhouse gas (GHG) emissions.

This is incredibly important as further buildouts of renewables to meet decarbonization goals will result in high levels of curtailment. PHS can provide value by shifting curtailed energy to low renewable production periods and reducing the need for fossil fuel generation. This value is characterized by a total system cost analysis of meeting in 2030 demand by adding marginal PHS under alternative capacity scenarios. This thesis calculates the investment and operational costs of said marginal PHS. Furthermore, it asks whether these marginal PHS produce the lowest system cost, or whether investments in alternatives--such as solar PV or wind produces a lower system cost. Ultimately, this thesis shows that at expanded penetrations of wind and solar PV, and a firm baseload low-carbon resource, PHS is a lower system cost alternative to further reducing GHG emissions than building out additional renewables.

If countries are to expand renewable capacity and they have the ability to expand PHS capabilities they should. To encourage this investment in competitive restructured markets, policy needs to allow PHS to operate within all sectors of electricity including generation, transmission, and distribution.