When the wind howls in Denmark and energy demand is low, turbine farms can store energy in a Norwegian reservoir for use the next day.

But a hard wind in the dead of a Texas night has power companies paying customers to use electricity they don't need.

That is a waste of clean power -- something that U.S. promoters of renewable energy want to change. Among the American boosters of pumped hydro storage is Energy Secretary Steven Chu, who maintains that water-based storage could help ease the integration of renewable power into the electrical grid.

Using pumped hydro to store electricity costs less than $100 per kilowatt-hour and is highly efficient, Chu told his energy advisory board during a recent meeting. By contrast, he said, using sodium ion flow batteries -- another option for storing large amounts of power -- would cost $400 per kWh and have less than 1 percent of pumped hydro's capacity.

"Yet in the United States," he said, "[pumped hydro] has not been seriously planned or looked at -- yet."

This is how pumped hydro storage works: Excess electricity is used to pump water uphill into a reservoir. When power is needed, water is released over a turbine to generate electricity. Water can either be used on a once-through basis and allowed to flow to a river, or it can cycle endlessly in a closed loop.

There are about 40 U.S. pumped hydro facilities, most of which were built on the East Coast in the 1960s, '70s and '80s to complement nuclear plants that produced a steady stream of power around the clock, said Rick Miller, past president of the National Hydropower Association and a senior vice president with Omaha, Neb.-based hydropower consultancy HDR-DTA.

The same principles that made pumped hydro a good choice for nuclear power plants make them good for renewable energy, Miller said.

Consider how the technology is used to help both Denmark and Norway, he said.

Windy Denmark is able to shift nighttime energy resources for daytime use, while Norway -- which gets almost all its electricity from conventional hydropower -- has reservoirs behind its dams that can easily store that excess power. The arrangement helps Norway mitigate some of the risk from drought and other challenges to its hydro-heavy grid, Miller said.

For Norwegians, the system is a great money-maker as well. They pay their neighbor almost nothing for the nighttime wind energy they take on since demand is so low at that time, but charge Denmark a premium for it at peak pricing hours.

"Norway is making a killing," Miller said. "Danish people pay the highest power prices in Europe."

If U.S. utilities could add pumped hydro storage to the grid, they could potentially play both sides of that equation and save money overall by avoiding both the highs and lows of wholesale power pricing.

In addition to the negative electricity prices sometimes seen in Texas, Miller said utilities in the Pacific Northwest sometimes pay people to take power thanks to quirks in conditions on the Columbia River.

Conventional hydropower turbines on the river provide a large amount of electricity to the area's grid, Miller said, but several stakeholders on the river have a say in how they operate. There are no reservoirs to store water behind the dams there, so pumped hydro is not an option, and certain minimum and maximum amounts of water must continually flow over the dams to support fish populations in the river and to keep it navigable for watercraft.

As a result, Miller said, Columbia River hydropower is a "must-run" resource that cannot be throttled down when electricity demand is low. Sometimes, the result is negative pricing.

Miller said situations like these could increase as more utilities face renewable energy portfolio standards, mandates requiring that a certain percentage of electricity be generated using wind, solar and other renewable sources.

Environmental impacts

Advocates say that closed-loop pumped hydro technology is easier on the environment than conventional hydropower projects. Those can drastically change water levels downstream, and if reservoirs are included, they often flood habitats above the dam as well.

Boosters point to the Eagle Mountain project, a closed-loop system proposed for construction near Palm Springs, Calif., by Eagle Crest Energy Co., that is awaiting a permitting decision by the Federal Energy Regulatory Commission.

Eagle Mountain is sited to take advantage of two abandoned iron ore quarries that would be connected with an underground tunnel. Water would be pumped to the higher quarry when power is plentiful and would drop over turbines to the lower one to generate an expected 1,300 megawatts of power, roughly enough to serve 1.3 million homes.

Because the quarries are abandoned and the system would continuously recycle nonpotable water, the project's environmental impacts are projected to be minimal and its cost low, planners say.

With California under a state mandate to generate 33 percent of its power from renewables by 2020, Eagle Mountain could be a valuable resource for balancing the grid.

The environmental group American Rivers has campaigned against conventional hydropower projects and for the removal of dams on rivers. But the group is not opposed to pumped hydro storage when built off-river in closed-loop systems, according to John Seebach, who runs the organization's Hydropower Reform Initiative.

"Closed-loop systems have the promise of not causing the ecological harm to rivers that you see in traditional hydropower [and] traditional pumped storage projects," he said, provided it is done with appropriate environmental reviews and safeguards.

"I don't think people are really talking about building new on-river projects. Once you move something on-river ... you're going to introduce a lot of harm," he added, pointing out that pumping water for an on-river system can require that the water flow backward -- wreaking havoc on the ecosystem.

'Certainty in pricing'

The complication: While pumped hydro is technically simple, it is expensive to build.

For a typical 1,000 megawatt facility, DOE estimates the cost at between $1 billion and $2 billion. That makes pumped hydro cheaper on a per-megawatt basis than any other large-scale storage option except for one, a strategy that stores compressed air in naturally occurring cave formations. But pumped storage, while flexible and relatively inexpensive, still costs too much for any but the biggest utilities to finance on their own.

Today, pumped-hydro projects take five years to permit and five years to build, comparable to what is needed for a nuclear plant.

A major hurdle for stored-hydro projects, according to the Hydropower Association's Miller, lies with regulations and pricing around the grid services that storage provides.

"The industry understands the physics of it, but the markets don't have an ability today to monetize the benefits of pumped storage," he said.

Grid services like load shifting and reliability are difficult to price into electricity rate structures. Regulated utilities do not have a good way to charge for them, and deregulated utilities have little incentive to raise prices to fund capital-intensive projects that won't be completed for years.

Energy regulators view pumped storage as a transmission tool, while the technology shows up on utility maps as an energy sink because it spools out slightly less energy than is fed into it.

Many of the questions over how pumped hydro is priced come back to rules set by FERC.

Miller said reworking those rules to recognize the contribution that storage makes would be the biggest help for the industry. "The industry is not looking for tax handouts; they're looking for certainty in pricing so they can get project financing," he said.

But if storage technologies were to become eligible for an investment tax credit, or ITC, he said, pumped storage should be included. "An ITC alone is not going to be enough, alone, to get financing," he added. "But a more certain market, alone, would be enough to get financing."

The regulation of carbon emissions would also help, Miller said.

Without such regulations, utilities often opt to build new natural gas plants to add power that can be provided as needed to balance the less-than-steady supply from renewables.

But it is unclear, Miller said, which option is cheaper long term for utilities, and the answer depends in part on the price of natural gas. A price on carbon, he said, would likely weigh in favor of hydropower.

DOE as a catalyst

Energy Secretary Chu's stated interest in hydropower can help the technology move forward, but DOE's abilities there are limited.

Jacques Beaudry-Losique, manager of DOE's Wind and Water Power Program, which includes hydropower, said the program convened a stakeholder workshop earlier this month in Washington, D.C., to help it put together a playbook, due out later this year.

One thing slowing DOE down is that in 2006, its own hydropower program was shut down.

Beaudry-Losique said that with budgets tight, it was argued that hydropower was already commercial, so it did not need a research program. Then about 18 months ago, the program was restarted, with storage technologies as a focus.

The budget for pumped storage is about $2 million a year, Beaudry-Losique said, as compared with between $15 million and $20 million per year for the conventional hydropower program.

One request from participants at the recent workshop, according to Beaudry-Losique, was to get pumped hydro projects included in DOE's loan guarantee program. Discussions around that are under way.

He said DOE can also play a "catalyst role" by working with FERC to address permitting and other regulatory issues.

A DOE-funded study by the Electric Power Research Institute will examine what grid services pumped hydro provides, potentially contributing to structural market changes. FERC "Chairman [Jon] Wellinghoff has been very supportive of pumped hydro storage," Beaudry-Losique added.

The department is also providing technical assistance to the industry.

DOE is working with the Interior Department and the Army Corps of Engineers to publish a report on technical development, cost and site development models that could help project planners move faster, thus trimming cost. Beaudry-Losique said DOE can help shave a year off the permitting and a year off the construction phases.

The department is also assessing "every single stream in the country," he said, for conventional and pumped hydro storage.

As renewable portfolios are put in place, the need for power storage solutions will grow.

"Now is about the time" to focus on it, Chu told his advisory board, "because when you're at 1 percent, 2 percent of the electric supply system you don't really care. But when you're at 10 percent, you care."

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