Hydropower and its glossier subset pumped hydro has attracted fresh attention from the clean energy industry that wants its unique “deep storage” capabilities rewarded by energy markets to unlock investment in new projects.

There’s been a lot of talk about pumped hydro has the answer Australia’s energy storage needs alongside batteries. However, a November report released by the Clean Energy Council on Australia’s hydropower opportunity noted that only two projects have progressed to financial commitment since 2017 compared to the 27 battery projects that have done the same.

Pumped hydro expert National University Professor Andrew Blakers, who in 2017 mapped the potential spots for new pumped hydro in Australia and found as many as 5000, says the main reason for the delay is that there still aren’t enough renewables in the grid to warrant such large storage projects.

The big problem is transmission infrastructure, he says, or lack thereof. The grid may be decarbonising faster than expected but the transmission infrastructure, built for centralised energy generation where electricity ran from coal power stations to cities along high capacity networks, is failing to keep pace with the influx of distributed renewable energy sources.

“Transmission holds back the build rate of solar and wind – that’s the number one problem,” Blakers told Ecogeneration. “If you built new transmission line to woop woop it would be saturated in solar and wind farms in minutes.”

And the hold up on transmission infrastructure boils down to negotiations with long chains of land holders, who Blakers says haven’t been properly compensated in the past compared to the payments offered to farmers to host wind turbines or solar panels.

For cities with limited options for transmission infrastructure, he says pumped hydro can actually alleviate some of these congestion issues. In Sydney, for example, which is surrounded by national parks, there are only three power line corridors from the regions to the city – The Hunter region, the Blue Mountains and the Hume Highway.

Limited in the ability to duplicate these powerlines to bolster transmission capacity, Blakers says it would make sense to build large scale pumped hydro near the city to soak up power generated during the day to send down the constrained power lines at night when the transmission lines are operating at max capacity. He says pumped storage could be useful in this setting to accommodate the day-night cycle and act as a storage buffer for constrained power lines.

“The forgotten giant of clean electricity”

Hydro-electric power has come a long way since the Duck Reach Power Station started generating energy for Launceston in 1895 as the first hydro operation in Australia. According to the CEC report, there are now 8.5 GW of hydropower assets in operation across Australia, which covered around 13 per cent of the country’s energy needs in October 2021.

The dams of the past, however, have left ugly scars in the landscape, plugging up waterways to flood entire ecosystems and settlements. They may provide a clean, reliable source of energy, but most traditional hydro dams are far from sustainable.

The damage caused by hydro projects was recognised at the 2021 World Hydropower Congress, where the San Jose Declaration was issued that calls on countries to commit to building sustainable hydropower only. However, the congress also called for a doubling of global hydro capacity by 2050 to meet the world’s clean energy needs.

Enter pumped hydro. Grids needs long duration storage to soak up wind and solar when these renewable sources aren’t generating and pumped hydro has this ability but generally without the environmental costs of traditional hydro.

As former PM Malcolm Turnbull explained at a Clean Energy Council webinar on hydropower in November, who’s pet project Snowy Hydro 2.0 is one of the two pumped hydro projects currently under construction in Australia, pumped hydro doesn’t need to be on a river or need a giant dam. It can be completely closed loop systems that require one reservoir a few hundred metres higher than a second reservoir so that water can be pumped to the top when electricity is cheap and released through turbines to generate energy when needed.

Pumped hydro also provides critical grid stabilising services, such as inertia, system strength to support wind and solar, and fault current and voltage control.

Locking in the money

Part of the problem is attracting investment in pumped hydro.

Pumped hydro is not an easy sell for private investment given the capital investment needed, the long development period and the protracted asset life. A number of promising pumped hydro projects have fallen over, and aside from the taxpayer funded Snowy Hydro 2.0, the only other project to get the green light is North Australia Infrastructure Facility and the CEFC-backed Kidston pumped hydro project in north Queensland, which is currently being built by Genex.

One of the challenges is that financing long duration storage is difficult in an energy market set up for incumbent energy sources.

Blakers says there are quite a few ways to make money out of big storage such as pumped hydro. One is arbitrage, which is buying energy when its cheap and plentiful and selling it when its expensive and in short supply. But he says there are a whole raft of other things storage does that aren’t properly rewarded. This includes things like frequency and voltage control, which kick in at times of strain such as during a coal station outage. “Storage can step in and fix it.”

He says pumped hydro projects should be compensated appropriately for the stabilising services it provides, and that while there’s a lot of talk about adapting the energy market rules, he believes “we could have a bit more urgency.” The CEC is also keen to see more action.

There has already been some progress towards energy market rules that value the distinct services of pumped hydro, as noted in the CEC report. In particular, the Energy Security Board (ESB), working with the Australian Energy Market Commission, has developed new markets to value system strength, which is one such service that hydropower can provide.

Other countries are further ahead. Turnbull says the UK is on track to announce new capacity payment rules that will bolster the financial feasibility of long duration storage.

Australia as a world leader

Blakers notes that Australia has the potential to be a world leader in the clean energy transition.

“People talk a lot about learning lessons from overseas and in this case, the lessons are flowing in the opposite direction.”

He also notes that given the plethora of pumped hydro options needed to support high levels of wind and solar, the path to a clean grid supported by storage has been paved.

“We have about 4000 choices and we need about a dozen of them.”

Poppy Johnston is the editor of Ecogeneration.