News

• Mexico has set ambitious goals for the share of variable renewable energy sources in its generation portfolio. This rising share is accompanied by a growing need for flexible resources to mitigate the variability of wind and solar generation.

• Pumped storage hydropower plants can play the role of a generator or load as required by the operator and can make a significant contribution to system flexibility and hence to the stability of power supply.

• During a one-day workshop in Mexico City, a team of international experts provided insights on global trends in technology development and market framework conditions for pumped storage hydropower in the US, Japan, South America and the EU.

• The exchange of experiences led to a vivid discussion on best practices in the design of regulatory framework conditions for pumped storage hydropower and its potential role within Mexico’s power sector reform, in particular for the grid integration of variable renewable energy sources.

Mexico has recently embarked on a major reform of its power sector. Besides the establishment of a wholesale electricity market and the strengthening of institutional capacity, a central objective of the reform process is to promote a more intensive use of renewable and clean energy technologies. The Mexican power sector is highly reliant on fossil fuels, which make up 80 percent of the generation portfolio. With vast hydro, solar and wind resources, Mexico has committed to increase the share of renewables in total electricity generation to 25 percent, 35 percent and 40 percent by 2018, 2024 and 2035 respectively, with a focus on wind energy expansion.

According to Mexico’s National Renewable Energy Inventory (INER), wind and solar energy could supply practically all the country’s annual electricity needs. However, balancing the variability of wind and solar energy could require investing in additional flexible fossil fuel generation capacity, which would considerably increase grid integration costs.

An alternative, however, exists. Pumped storage hydropower plants are able to act as giant batteries, storing surplus energy produced by wind and solar power plants when the sun is shining and wind is blowing, and then discharging that energy when demand is high and these ‘variable’ renewable energy sources are dormant. As such, pumped storage hydropower provides tremendous balancing services for the entire system.

The Mexican Energy Secretariat (SENER) and the Mexican Federal Electricity Commission (CFE) have already initiated cooperation activities with national and international institutions to explore the role that pumped storage hydropower can play for the integration of variable renewable energy into the grid. CFE has identified several sites that are well suited for the development of pumped storage projects and conducted a series of pre-feasibility studies.

However, a lack of domestic experience in the evaluation of the benefits of pumped storage hydropower, combined with inadequate legal and regulatory frameworks to recognize and reward those benefits, prevented potential projects to be realized in the past. To address this, SENER and CFE approached the World Bank about organizing a knowledge exchange where international lessons about pumped storage could be broadly discussed.

On 28 July 2015, a workshop was jointly organized by the World Bank Latin America & Caribbean energy team, the Energy Sector Management Assistance Program (ESMAP), SENER, and CFE in Mexico City. The workshop focused on the main drivers and barriers for the implementation of pumped storage projects, and on the potential role of pumped storage for the integration of variable renewables in Mexico.

The event was attended by experts from Germany, Japan, USA, Spain, and Chile, who shared their insights on pumped storage technologies and applications as well as the regulatory, legal and economic conditions that have made the expansion of pumped storage possible in their countries.

The presentations showed that pumped storage hydropower, in particular advanced technologies such as variable speed plants and plants with a separate turbine and pump set, can play a significant role in integrating wind and solar resources into grids. In addition to increased system flexibility, pumped storage plants can provide a wide range of ancillary services, including frequency control, voltage control, and re-dispatch capability. As a result they contribute to the reduction of curtailments of wind and solar power plants (where electricity is produced, but cannot be taken up by the grid) and mitigate increased greenhouse gas emissions caused by ramping up fossil fuel-fired power plants at times when solar and wind power inputs are low.

Compared to other technologies that provide flexibility in systems with high levels of wind and solar energy, pumped storage is a very mature technology.  Yet innovations continue: hybrid models combining variable renewable energy with pumped storage are in development, such as the Wind-Hydro-Pumped Station of El Hierro on Gran Canaria or the “Espejo de Tarapacá” project in Chile that would integrate a 300 MW pumped storage facility with a 600 MW photovoltaic solar plant by 2019.

At the same time, pumped storage projects are often exposed to complex authorization procedures and economic pressures due to their high capital cost, which delays project development. Up until now, pumped storage projects have been most successful in island systems, where system operators rely on pumped storage plants for system stabilizing measures.

At the workshop, participants agreed that new market designs should be developed to acknowledge the contribution of pumped storage to system flexibility and treat pumped storage as a transmission rather than generation resource. Regulatory frameworks should be established that provide adequate incentives for investments into pumped storage, for example through the creation or advancement of ancillary service markets. Furthermore, pumped storage should be considered in overall system planning, particularly when developing renewable energy expansion plans.

Following the event, SENER expressed interest to request technical assistance from the World Bank in order to analyze the most suitable flexibility options for the country and elimination of barriers for the deployment of pumped storage plants in Mexico as well as to carry out an assessment of the economic value of pumped storage, taking into account its contribution to variable renewable energy grid integration.

Agenda

Presentations

Related Links

• Environmental Implications of Pumped Storage Hydropower Deployment

• Pumped Storage Potential in the Spanish Electricity System (in Spanish)

• Report on the Barriers within the Spanish Regulatory and Market Framework to Furthering the Development of Bulk Energy Storage Technologies (in Spanish, executive summary in English)

• Final Report of the stoRE Project

• Modeling and Simulation of Advanced Pumped-Storage Hydropower Technologies and their Contributions to the Power System

• Report on Challenges and Opportunities For New Pumped Storage Development

• Modeling and Analysis of Value of Advanced Pumped Storage Hydropower in the United States

• CAISO - California Pumped Storage

• Solar-pumped Storage Hybrid Project