Policies & Regulations: What’s So Hard about Licensing a Pumped-Storage Project?

Pumped storage is a proven technology, with 42 projects now in operation in the U.S. representing more than 23,000 MW. While other technologies are emerging, none have proven worthy of development on a broad scale.

By Kirby Gilbert, Howard Lee, and Mike Manwaring

With growing interest in the deployment of a variety of different energy storage technologies to help accommodate the increasing penetration of renewable energy resources into the generation mix across the globe, there are numerous ongoing investigations and debates regarding the relative benefits of various forms of storage.

Out of all of the energy storage technologies, pumped storage hydro is the most established and technically viable, and it is currently cost competitive due to low interest rates for financing and the wide array of ancillary benefits to the electrical grid that it provides to a region. It can achieve one of the highest cycles per lifetime at one of the lowest costs.

Pumped storage, however, is constrained by the need for good geologic site conditions and the availability of landforms with suitable elevation differential within a reasonably close horizontal distance. The siting and feasibility aspects of a potential pumped-storage project are one major hurdle, but the licensing process through the Federal Energy Regulatory Commission (FERC) is another that can add significant time – up to five years or more – on a development schedule for a new project and thus constrain its development.

Energy Storage Overview

Currently there are many energy storage technologies at various stages of development and commercial applicability and many technologies are adaptable at various scales and uses in the continuum from energy generation through transmission and into distribution and localized uses.

The resurgence of interest in energy storage stems from several benefits, including:

– Enhancement to the value of intermittent renewable energy resources (such as wind) on the power grid by firming their capacity;

– Improvement in power quality by providing ancillary services such as voltage regulation, spinning reserves, etc;

– Ability to store low value, excess energy when power supplies exceed demand until the energy can be economically used to meet load;

– Enhancement of the flexibility of the existing transmission grid;

– Relief of transmission congestion to defer capital expenditures on system upgrades; and

– Conversion of inexpensive off-peak energy into higher value on-peak power.

The most commonly discussed energy storage technologies include: (1) pumped storage hydropower, (2) compressed air energy storage (CAES), (3) flywheel energy storage, (4) battery storage technologies, (5) smart-grid enabled, distributed storage or load shifting technology, and (6) thermal energy storage.

For energy storage with an output on the order of 1,000 MW at a site, only pumped storage hydro and perhaps CAES provides this capability. However, the most suitable locations for developing compressed air energy systems are in salt domes, like those found in Texas or Alabama. Widespread application of this technology in the U.S. is not very likely.

Battery installations can only provide energy storage on the order of tens of megawatts, and at a relatively high cost in terms of dollars per megawatt-hour of output. Battery storage systems could however be deployed in the future as a distributed network of storage systems by placing large battery banks at individual wind installations or in nearby substations, potentially prolonging the timeline as to when more practical, large-scale bulk or mass storage such as pumped storage hydro would be needed in the region.

The most commonly used configuration for pumped storage hydro as an electricity storage facility consists of a dedicated storage reservoir (usually an upper reservoir), water tunnels and conductors, a power house with electrical substation and transmission connection, and a lower reservoir that is often part of a naturally occurring stream, river, lake or existing hydro project reservoir (see Figure 1).

Until recently, all pumped-storage projects used fresh or sweet water as opposed to salt or sea water. There is one project in Japan that uses saltwater, with the ocean being the lower reservoir. It has shown that a saltwater design is possible, but that there are unique technical issues (many to do with corrosion) that yet need to be resolved before this could have widespread application.

Pumped-storage hydroelectric projects are one of the few commercially viable energy storage technologies that can provide mass or bulk storage services for a transmission system on a large scale. However, pumped storage is sometimes characterized as having disadvantages. The ones most frequently brought up include the limited number of suitable sites, long lead times necessary to get approvals, and a relatively long construction period.

Pumped storage is a proven technology with 42 projects owned by 23 entities now in operation in the U.S. representing more than 23,000 MW of FERC-licensed pumped storage projects.

While other technologies are emerging, none have proven worthy of development on a broad scale. In the U.S., non-federal pumped-storage projects typically require a FERC license which is a very time consuming and expensive process. Other storage technologies not involving hydroelectric generation are not typically subjected to such a lengthy regulatory process to secure approvals for development. As a result, they have an easier and shorter path to a construction start.

Current Pumped Storage Project Development Considerations

Other than the new Olivenhain-Hodges 40 MW pumped storage project currently under construction in southern California, the last major pumped-storage project to become operational in the U.S. was Olgethorpe Power’s Rocky Mountain Hydroelectric Plant that went online in 1995 (see Figure 1 on pg. 30).

A new pumped-storage facility has not been licensed and built in the U.S. for more than 15 years. The inability to easily quantify and value all the benefits of pumped storage combined with difficulty in obtaining approvals from regional transmission operational and utility regulatory processes has stymied many pumped-storage schemes.

Another set of challenges include the high development costs and long licensing, financing, and design timelines.

These factors have probably contributed to a lack of development of new pumped storage projects in the U.S. in the last 15 years. Existing pumped-storage projects typically make use of existing bodies of water, and issues such as those related to recreation use along shorelines with frequently fluctuating water levels, fish entrainment and mortality in the intakes and turbines, and degrading water quality have continued to plague some pumped storage operations.

However, with climate change concerns, there is an increasing push to reduce fossil fuel based energy generation sources while at the same time an increasing interest in deployment of new intermittent renewable energy generation sources, which lead to new transmission system stabilization concerns in many areas of the U.S. These factors all help contribute to the need for development of additional pumped-storage hydro projects in the future.

Map of Existing Pumped Storage Hydroelectric Projects in the U.S.

Closed Loop Projects

Recently, a number of pumped-storage projects have been proposed that incorporate a “closed loop” system, where both upper and lower reservoirs are located “off-stream.”

A closed loop system would seem to be a type of project that should receive serious consideration for implementing some new or streamlined FERC regulatory approval process that leads to reduced licensing periods. The rationale is that these types of projects are thought to be more environmentally benign, and thus more acceptable to resource agencies, environmental groups, and the public due to the fact the project would have no or little relationship to a public waterway and its aquatic resources.

Closed loop pumped-storage projects provide a potential solution to many environmental issues associated with hydroelectric development as they could provide energy storage without degrading existing aquatic habitats. If a hydroelectric project is developed as a closed loop system in an off-stream location, and does not have facilities in or on navigable waters or federal lands, then FERC’s jurisdictional tie is derived from its transmission interconnection “affecting interstate commerce.” In most states, an effect on interstate commerce is established if the project is interconnected to the interstate grid. Almost any reasonably-sized mass storage system will have environmental impacts associated with its construction and operational footprint whether it’s a large battery farm, CAES plant, or pumped storage project. All types of bulk energy storage facilities require similar considerations related to public interest factors, safety, land management and ownership rights, and environmental effects.

Additionally, all types of energy storage technologies whether it be CAES, batteries, or pumped storage all have the same environmental considerations associated with transmission lines and interconnections. Therefore, it seems that closed loop pumped storage projects are unnecessarily being singled out as requiring more regulatory scrutiny than other comparable large scale storage technologies. If energy storage is going to serve a facilitating role in increasing the supply of intermittent renewables, there needs to be some reform or another way to shorten the regulatory approval processes for pumped storage hydro.

Typical Pumped Storage Arrangement

At the same time, there needs to be more outreach to help educate the public and political bodies on why energy storage is necessary and thus change current societal perceptions toward such technologies as it relates to advancing sustainable development projects in the political and regulatory environment of today’s renewable energy revolution.

Pump-back Projects

Pumped-storage projects that use conventional hydro units, with a pumped-storage cycle superimposed on the normal flow through hydro generation operation, form a class of projects known as on-stream integral pumped-storage or “pump-back” projects. Pump-back projects use two reservoirs located in tandem on the same river.

They are operated as a conventional hydro plant part of the time, but when water flows are low, or when peak demand is high, the project can be operated in the pumped storage mode. Since these projects involve normal river flow, they are subject to various mandated water flows, water quality standards, fish protection measures, navigation protections, and other environmental constraints. Such constraints are often onerous and complicate project development. Hence, the pump-back concept is different than other forms of energy storage, as costly considerations to protect aquatic resources are inherently an important component in the configuration, design, and approval.

Licensing Frameworks

Under the current regulatory framework, pumped-storage projects that make use of existing river system reservoirs or naturally occurring lakes will generally fit well within the regulatory arms of FERC. For now. it appears that most proposed closed loop systems in the lower 48 states are also going to be found jurisdictional. However, there needs to be some further examination and debate as to why FERC would need to use the same licensing procedures for projects on waterways if a closed loop system used groundwater and is off channel from a navigable waterway.

Under FERC’s comprehensive development standard, FERC can approve a hydroelectric project provided it is “best adapted to a comprehensive plan for improving or developing a waterway or waterways for the use or benefit of interstate or foreign commerce, for the improvement and utilization of water-power development, for the adequate protection, mitigation, and enhancement of fish and wildlife (including related spawning grounds and habitat), and for other beneficial public uses, including irrigation, flood control, water supply, and recreational and other purposes referred to in section 4(e)” of the Federal Power Act.

If the water source used for filling and providing “make up water” for a closed loop pumped storage project comes from a canal diversion, groundwater, or even a utility discharge there really is no waterway for the project to adapt to. While reform considerations will likely be carried forward by industry associations such as the National Hydropower Association to work toward getting a shortened FERC regulatory process for projects like this, the next best thing is for a proponent to work within the existing processes and find ways to shorten the timeframes and gain public and agency acceptance of a project on a case-by-case basis.

FERC’s Integrated Licensing Process (ILP) is the default process for licensing a project and that process can take a full five years to get through. The ILP process was developed to help better streamline the hydro licensing process for FERC licensing and related approvals. Each step, from early consultation through post-filing processes, is defined by a rigid framework of milestones. While the ILP is suitable for use in the licensing of a new project, it is better suited to re-licensing an existing project. The application of the ILP for a new hydroelectric project (either conventional or pumped storage), presents challenges that are different than those faced in relicensing.

One good option to shortening the licensing timeline is to try to use the Traditional Licensing Process (TLP). This can be achieved through a formal request to FERC at the time of filing of a Preliminary Application Document (PAD) and Notice of Intent. Using the TLP reduces FERC staff involvement in the pre-filing stages but also eliminates many deadlines, which ultimately allows an applicant the ability to move ahead quicker on defining and carrying out studies and filing a license application. The key to using the TLP successfully is to seriously engage the resource agencies, affected tribes, and other key stakeholders early on so their needs can be fully and objectively addressed in the pre-filing stages, otherwise FERC will essentially start over with the dialog with such parties once it begins processing the application.

Making best use of the FERC processes

Unlike a relicensing, it is important to note that developing a new project requires a substantial construction effort that will affect many new jurisdictions and resources. The complexity of identifying and incorporating the different approval requirements into the licensing phases can also be a much greater effort than in relicensing.

There are many construction requirements and conditions as well as most of the operational and performance considerations found in relicensing of existing facilities. It is important to define all permitting requirements early on and try to maintain a defined and coordinated path toward other agency approvals, concurrent with the licensing. Bringing the required construction-related permitting and regulatory compliance needs into the fold of the ILP or TLP can help speed the permitting and approval process in the license implementation phases leading to final go-ahead for project construction.

Compared to relicensings, challenges for new projects include not having an existing set of Exhibits on file to use as the basis of the project description and project boundary, and no information on historical operation, which is very useful in determining and addressing environmental effects and proposed mitigation measures. Additional time and costly design resources need to be devoted to building these detailed exhibits from scratch during or ahead of the agency consultation and pre-filing process. Understanding all of the existing encumbrances upon the lands included in the proposed FERC project boundary is useful before the project boundary maps are released to the public and other stakeholders.

Getting realistic and cost effective transmission line interconnection points usually requires input and studies from other utilities or independent system operating groups and this can take from months to more than a year to get decisions made. It is important to factor in study timelines analysis of the transmission line route, but only after the point of interconnection is fairly certain. Paying full attention to this process is important early on in order to shorten the licensing process.

Getting permissions from landowners to conduct engineering, geotechnical and/or environmental studies on the proposed development site can also be difficult and slow progress in developing project feature designs, as many developers do not yet own the rights to project site lands.

Getting approvals for studying and field sampling efforts needs to be done early on so as not to miss the prime or optimal study seasons. If federal lands are involved, some studies such as Phase I cultural studies require additional specialized permits such as the Archaeological Resources Protection Act (ARPA) permit. Additionally, because the applicant has not usually been involved with the new land managing and regulatory agencies at the project site, there are often new personalities to get to know and there is often an added educational element to bring agencies up to speed on the requirements of FERC licensing and associated timelines for interim reviews and approvals. Early on in the ILP or TLP process, starting with the agency and public review of the PAD, there tends to be more critique and debate regarding the purpose and need of the project and designed attributes of the project than under a relicense. It is important to develop media and public information factsheets, brochures and Web sites to clearly tell the story of why pumped storage is a benefit to the public.

Gaining Regulatory Approvals

By the time a license application is ready for filing, it is important to be clear on what impacts are likely and demonstrate that every effort to resolve, mitigate, or enhance relevant environmental or social impact issues has been undertaken. While there is no one single factor that can lead to a shortened licensing process, obtaining certification under Section 401 of the Clean Water Act is one of the biggest factors that can speed along the FERC process. It is important to work with state agencies in charge of Section 401 certification from the beginning of the licensing process to ensure their requirements can be met while doing studies, collecting information, and finalizing concept designs and mitigation measures for the project.

Kirby Gilbert is business development manager for MWH Americas. Howard Lee is vice president of MWH Americas. Mike Manwaring, former hydropower project manager for MWH Americas, is regulatory manager for HDR/DTA.

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