Article

In the Transition to a Low-Carbon Economy, Pumped Storage Will Be Critical

By Chuck Sensiba and Elizabeth McCormick

As the United States moves toward a low-carbon economy, zero-carbon emitting sources of electricity will be increasingly critical to stabilize the electric grid and prevent outages, including those associated with extreme weather events. Wind and solar resources are, of course, necessary to achieve this goal, but their intermittent nature poses a challenge to maintaining grid reliability, particularly when utility-scale battery storage remains quite costly. By providing energy storage and generation in a way that takes advantage of peak demand times, pumped storage hydropower provides a way to optimize the availability of wind and solar generation at a fraction of the cost of battery storage. Over the last several years, Congress has passed legislation that seeks to increase the deployment of pumped storage hydropower, including by providing funding opportunities and directing the Federal Energy Regulatory Commission (FERC) to develop an expedited licensing process for closed-loop hydropower facilities. These opportunities, in addition to the fact that closed-loop pumped storage facilities are likely to have fewer environmental and natural resource issues, make pumped storage an attractive proposition for developers. 

Background 

Pumped storage hydroelectric facilities generate electricity by moving water between two reservoirs. When demand for electricity is low, typically at night, excess electric generation capacity is used to pump water from the lower reservoir to the upper reservoir, where it is stored until demand for electricity increases during the day. When demand rises, the stored water is released back to the lower reservoir through a turbine to generate electricity. 

Open-loop pumped storage facilities maintain a continuous connection to a naturally flowing water feature, while closed-loop facilities do not. Currently, there are 43 pumped storage projects operating in the United States, all of which are open-loop facilities. Of those 43 projects, 25 are nonfederal projects that hold either licenses or exemptions from FERC, while the remaining 18 are operated by the Bureau of Reclamation, the U.S. Army Corps of Engineers, the Tennessee Valley Authority, or the California Department of Water Resources. Additionally, there are approximately 25 active or pending preliminary permits for pumped storage facilities before FERC. Preliminary permits grant permittees priority status to file a license application for a given project while conducting feasibility studies and developing a license application. 

Due to their unique two-reservoir configuration, pumped storage facilities provide significant benefits to the electric grid, including the ability to provide energy storage in the upper reservoir. Indeed, pumped storage hydropower facilities currently provide approximately 95 percent of utility-scale energy storage in the United States. Due to the intermittent nature of wind and solar generation, the energy storage provided by pumped storage hydropower facilities is critical to integrating intermittent renewable resources into the electric grid, particularly at a utility scale. 

With the Biden administration’s goal of achieving 100 percent carbon-pollution-free electricity generation by 2035, additional energy storage in the form of pumped hydro will be critical to integrating more carbon-free electricity onto the grid, particularly as most of the currently operating pumped hydropower facilities were constructed over 30 years ago. To this end, the U.S. Department of Energy’s (DOE) 2018 Hydropower Vision report estimates that U.S. hydropower could grow from 101 gigawatts (GW) of capacity to approximately 150 GW by 2050, which includes approximately 36 GW of new pumped storage capacity. Recognizing the need to supplement the nation’s existing pumped storage hydropower fleet, Congress has in recent years enacted two notable pieces of legislation that seek to provide additional funding for pumped-storage hydropower and to streamline the permitting process for those facilities. 

The America’s Water Infrastructure Act of 2018 

First, in 2018, President Trump signed the America’s Water Infrastructure Act (AWIA), which, among other things, directed FERC to initiate a rulemaking establishing an expedited licensing process to issue and amend licenses for closed-loop pumped storage projects and to hold a workshop on and issue guidance on potential opportunities for the development of closed-loop pumped storage projects at abandoned mine sites. In response, FERC issued guidance defining a closed-loop pumped storage project as one that uses reservoirs situated at locations other than natural waterways, lakes, wetlands, and other natural surface water features, and may rely on temporary withdrawals from surface waters or groundwater for the sole purpose of initial fill or the periodic recharge needed for project operation. 

The guidance described the extent and types of abandoned mines in the United States and included information relevant to identifying appropriate mine sites at which to develop hydropower facilities, including information on the state and federal agencies with responsibilities associated with abandoned mines. 

In April 2019, FERC issued a final rule establishing an expedited licensing process for closed-loop pumped storage projects as proscribed by AWIA. To qualify for FERC’s expedited 

licensing process, a developer of a closed-loop pumped storage project must demonstrate that the proposed project would 

(1) cause little or no change in existing surface and groundwater flows and uses; (2) be unlikely to adversely affect threatened or endangered species or their designated critical habitat under the Endangered Species Act (ESA); (3) use only reservoirs situated at locations other than natural waterways, lakes, wetlands, and other natural surface water features; and (4) rely only on temporary withdrawals from surface waters or groundwater for the sole purposes of initial fill and periodic recharge needed for project operation. The regulations also require FERC to issue a final licensing decision for closed-loop pumped storage projects that meet the above-listed criteria no later than 2 years after FERC’s receipt of a completed license application. 

To facilitate this process, FERC’s regulations require applicants to submit documentation at the time the application is filed to show that the applicant consulted with stakeholders, including the tribes and federal and state agencies that are part of required authorizations under the Clean Water Act, the ESA, and the National Historic Preservation Act. For projects using public parks, recreation areas, and wildlife refuges, the applicant must submit documentation showing that the managing entity does not oppose a pumped storage project at that location. 

However, to date, this program has not resulted in the successful development of a closed-loop pumped storage project. Only one project has requested expedited treatment under the revised regulations, and FERC denied that request in 2020. As a result, additional policy-level work will likely be needed to fully realize the potential for more pumped storage facilities. 

The Infrastructure Investment and Jobs Act 

In fall 2021, Congress passed the Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law, which among other things authorized $10 million to be appropriated by the U.S. Department of Energy (DOE) in $2 million increments in fiscal years 2022 through 2026 for pumped storage hydropower, wind and solar integration, and system reliability. It also provides for a demonstration project pursuant to which DOE will “provide financial assistance to [an] eligible entity to carry out project design, transmission studies, power market assessments, and permitting for a pumped storage hydropower project to facilitate the long-duration storage of intermittent renewable electricity.” The IIJA also includes authority for pumped storage hydropower development using Reclamation reservoirs. As of the writing of this article, DOE has not announced how it plans to allocate the funding or issued any additional guidance on the demonstration project, but it is expected to do so in the coming months. 

Benefits to Developing Closed-Loop Pumped Storage Projects 

In addition to FERC’s expedited licensing process and DOE’s funding opportunities, there are other significant benefits to developing pumped storage hydropower facilities, particularly closed-loop projects that do not have a connection to a natural water feature. First, the developer has the flexibility to select a site, which can help to avoid issues associated with threatened or endangered species or critical habitat or the mandatory conditions under section 4(e) of the Federal Power Act that are typically required for hydroelectric projects located on a federal reservation. However, not every location is suitable. For example, sites generally need to have an elevation difference between upper and lower reservoirs. Additionally, while it is important to consider a project’s potential effects on ground and surface water and the degree to which the two may be hydrologically connected, closed-loop pumped storage projects typically have fewer effects on aquatic resources and, importantly, do not present issues associated with anadromous fish passage or minimum flows. 

Rather, project developers should consider other issues that may be relevant to constructing and operating a pumped storage project, including proximity to seismically active areas, access to transmission, risk of ground subsidence, real property and/or mineral rights issues, and culturally significant areas and Native American interests. Additionally, sites such as national parks, wilderness areas, or Superfund sites are generally prohibited from being used for new development. Additionally, developers of projects to be colocated with a wind or solar facility should consider whether and to what extent the construction and operation of the project might affect wind and solar facilities and whether there may be other resource considerations, including effects on terrestrial wildlife or birds. 

Conclusion 

To effectively take advantage of the expedited licensing process established by FERC and the new funding opportunities included in the IIJA, it will be increasingly important to know what factors to look for when considering a pumped storage facility. A familiarity with FERC and DOE’s processes and the siting factors described above will help to ensure that developers of pumped storage projects are able to offer significant benefits to both the electric grid and the environment. 

Chuck Sensiba is a partner in Troutman Pepper’s Washington, DC, office. He can be contacted at charles.sensiba@troutman.com. 

Elizabeth McCormick is an associate in Troutman Pepper’s Washington, DC, office. She can be reached at elizabeth.mccormick@troutman.com.