Pumped Hydro Storage Market

Market Overview

The global pumped hydro storage market size was valued at USD 329 billion in 2022. It is projected to reach USD 714.55 billion by 2031, growing at a CAGR of 9.0% during the forecast period (2023-2031). 

Pumped hydroelectric energy storage (PHES) is a subset of hydroelectric energy storage used to maintain stable power output throughout grid outages. Gravitational potential energy is stored by transporting water from a lower-elevation reservoir to a higher-elevation reservoir. Pumped hydro storage uses turbines to raise the potential energy of water that is kept in vast reservoirs and may then be converted to electrical energy. When rates are low, off-peak electricity is frequently used to power pumps. By keeping excess electricity from continuous baseload sources and intermittent renewables like solar and wind, pumped-storage hydropower allows for the smooth operation of grids during peak demand periods.

Compared to conventional hydroelectric dams with similar power output, pumped storage reservoirs are relatively small, and their production times are typically less than half a day. Streams and other critical infrastructures, such as water distribution systems and snowmaking facilities, present opportunities to implement pumped-storage solutions. A storm-water basin is a low-cost water reservoir in a micro-pumped hydro energy storage system.

Market Dynamics

Global Pumped Hydro Storage Market Drivers

Grid Stability Protection and Renewable Energy Integration

Globally, installed renewable energy capacity and generation have gradually increased over the past ten years. It is essential to store and release this energy so that it may be used when there is a spike in demand since variable renewable energy (VRE) sources like solar and wind produce power sporadically and at different rates. Additionally, a baseload power capacity is necessary to maintain grid stability during times of low VRE generation to avoid power quality problems. This is necessary for the successful integration of intermittent renewable sources. As a result, energy-storing systems (ESS) are rapidly becoming essential for renewable energy projects. During the projected period, one of the main drivers of the growth of the global pumped hydro storage market is anticipated to be the sector's rapid expansion in the renewable energy space.

Pumped storage systems have historically been the most often employed energy storage technology worldwide. Over 90% of grid-scale energy storage facilities worldwide as of September 2021 were operating pumped hydro energy storage systems, according to the International Hydropower Association. IRENA estimates that as of 2020, there were 2799.09 GW of installed renewable energy capacity worldwide, with 733.27 GW (26.2%) coming from wind energy and 713.97 GW (25.5%) from solar energy.

Global Pumped Hydro Storage Market Restraint

Growing Contest from Opposite ESTs

The expansion of alternative energy storage technologies is anticipated to have a substantial negative impact on the global pumped hydro storage market over the forecast period since PHS is an advanced technology that has been heavily commercialized and has little room for price reductions. Lithium-ion battery technology is PHS's main competitor. In the last decade, lithium-ion batteries have become much more affordable. In 2020, a lithium-ion battery's typical price per kilowatt-hour was USD 137. In 2020, the price of lithium-ion batteries was 12.17 percent lower than in 2019.

Battery producers in Asia-Pacific, particularly China, may produce batteries for a significant discount from the average global pricing due to lower labor costs. Large battery producers like Tesla, Sony, and even national governments are investing significantly worldwide to study and develop Li-ion batteries. These advancements seek to make battery cells more efficient and raise battery utilization rates.

Global Pumped Hydro Storage Market Opportunities

Technologies with the Cheapest Lifecycle Costs

Among all other commercially feasible ESTs as of 2020, PHS projects have the lowest lifecycle cost per unit of energy generated. Pumped hydro storage is the first large-scale EST to be created. Therefore, technology has advanced significantly. The price of the technology has drastically decreased over the previous century and has been fully commercialized. The exceptionally long lifespan of PHS projects—nearly 80 years on average—is a significant factor in their low lifecycle costs. As a result, when considering PSH's entire lifespan and storage capacity in the GWh class, its nearest price rival, lithium-ion battery systems, PSH's overall cost is much lower than theirs.

Moreover, projects' lifespans can be significantly increased by upgrading and updating existing assets. The Engeweiher pumped storage facility in Switzerland, the world's oldest operational pumped storage system, was constructed in 1907. It was renewed at the beginning of the 1990s and will run at least through 2052. Despite the high capital costs, these projects have a long life and a relatively cheap capital cost per unit of energy because PHS is an established technology with enormous volumes, lengthy discharge durations, and the highest rating among ESTs.

Regional Analysis

The global pumped hydro storage market is bifurcated into four regions: North America, Europe, Asia-Pacific, and LAMEA.

Asia-Pacific Dominates the Global Market 

Asia-Pacific is the most significant revenue contributor. Renewable energy, hydropower, and pumped hydro storage facilities were developed in the Asian-Pacific region as a result of the region's ongoing shift away from fossil fuels, particularly in China, Japan, the ASEAN region, South Korea, and India. China also declared its intention to reach a coal consumption peak by 2025 and achieve carbon neutrality by 2060. Due to increased investment in the renewable energy industry, approximately 13.76 GW of new hydropower capacity, including 1.2 GW of pumped storage from the final four Jixi project units, was installed in 2020. State Grid Xinyuan Company, a State Grid Corporation of China branch, created it. 

Europe is one of the most aggressive regions regarding climate change, and hydropower has consistently been the region's top renewable energy source. As it shifts to a cleaner energy mix, the contributions of solar and wind power also multiply. 2020 was a significant turning point in the European Union's journey toward decarbonization, as all renewable energy sources together produced more electricity than fossil fuels for the first time. Despite the COVID-19 pandemic's reduced need for electricity, global hydropower generation was 4% greater in 2020 than in 2019, partly due to more robust output in the Nordic and Iberian regions. As a means of ensuring a more reliable and adaptable energy source, improvements in pumped storage hydropower were then seen in the area.

Pumped hydro storage capacity in North America as of 2020 was 23.03 GW, with most of this capacity located in the US. This is partly because of the country's sizable hydroelectric capacity, which, as of 2020, was approximately 102 GW. Even though Canada has a sizable hydropower capacity of 82 GW, it has yet to use all of its pumped hydro storage potential because it only has 117 MW of the mentioned technology. Given its wealth of natural resources, North America is ideally equipped for the production of renewable energy. Moreover, hydropower has long sustained a sizeable portion of the global electrical market. To transition to a low-carbon economy, nations in the area have developed policies to enhance the share of renewable energy.

LAMEA is one of the significant renewable electricity sources in the world. In light of the extensive hydroelectric infrastructure in the region, a recent Inter-American Development Bank (IDB) study finds that pumped-hydro energy storage (PHS) has substantial potential for Latin America and the Caribbean (LAC). The majority of the pumped-hydro storage capacity in the Middle East and Africa will be provided by South Africa in 2020. In 2020, South Africa had a total installed capacity of roughly 2912 MW, equivalent to over 59% of the share in the entire region. Iran came in second with an installed capacity of 1040 MW, accounting for 21%.

Segmental Analysis

The global pumped hydro storage market is segmented by type.

Based on type, the global pumped hydro storage market is bifurcated into open-loop and closed-loop.

Pumped hydro storage facilities in open-loop systems store water in an upper reservoir devoid of any natural inflows. In contrast, pump-back plants function using a combination of pumped storage and conventional hydroelectric plants, with a natural river input in place of an upper reservoir. Conventional hydroelectric facilities don't employ pumped storage; by delaying output until needed, these hydroelectric plants with large storage capacities could function similarly to pumped storage in the electrical grid. Open loop pumped hydro storage is preferred in many geographies due to its proximity to natural water resources like rivers and streams. The project will probably be implemented within the anticipated time frame due to the expensive expense of developing alternative systems and abundant water streams.

In the U.S., almost all of the current pumped hydro storage projects use open-loop systems and a free-flowing water source for the lower or upper reservoir as of 2020. For instance, the 1.2 GW Helms pumped storage project by Pacific Gas and Electric (PG&E) runs between the Wishon and Courtright reservoirs, which were created by building dams across Helms Creek. However, there were 67 new pumped hydro storage projects in the development stage in the U.S. by the end of 2019, 32 of which were open-loop projects and 35 of which were closed-loop projects.

Pumped hydro storage plants are made in closed-loop systems, where one or both reservoirs are artificially constructed, and neither reservoir receives any natural water inputs. The only way to store a significant amount of energy is to place a large body of water next to another body of water that is as high above the first as practical. This occurs spontaneously in various locations. Others have one or two artificially created bodies of water. Due to the pumped storage systems' somewhat poor energy density, there must be significant height variations or substantial flows between reservoirs.

Pumped hydro storage with a closed loop provides high flexibility, dependability, and power output. Compared to open-loop pumped hydro storage systems, closed-loop pumped hydro systems have a lower environmental impact because they are not connected to existing river systems. Furthermore, they can be placed far from an existing river because they can be placed wherever grid support is required. Due to the increased confidence in obtaining an operating license or licenses and the fact that closed-loop systems do not interfere with any existing river systems or water streams, they are expected to experience significant expansion in the upcoming years. 

Recent Developments

• February 2023- Slovenia utility DEM plans 60MW battery storage co-located with a hydroelectric plant and new PHES unit.
• February 2023- Hitachi Energy innovated a pioneering solution for a pumped hydro storage plant in Europe.