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Report: U.S. hydro can quintuple its value with proper market structure

Opportunity exists in the U.S. to increase the market value of hydro storage plants by 200% to 500%, according to a recent study by The Brattle Group.
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Report: U.S. hydro can quintuple its value with proper market structure

Opportunity exists in the U.S. to increase the market value of hydro storage plants by 200% to 500%, according to a recent study by The Brattle Group.

“Maximizing the Market Value of Flexible Hydro Generation” says that with resource flexibility becoming more important on the grid, pumped, reservoir and pondage hydro plants can offer a significant value as the major provider of system flexibility.

With the resource mix changing rapidly from 2010 to 2020, thanks to both retirements and additional generation, flexible resources are needed to operate with, in particular, an increasing share of variable generation.

The report points to one important complement: batteries and flexible hydro. Flexible hydro plants can be used, through daily and seasonal storage, to meet peak loads and to help integrate large baseload plants (nuclear, coal and run-of-river hydro). In addition, battery storage is gaining momentum, with 50 GW of battery storage potential at a cost of $350 per kWh installed, Brattle says. “Together with battery deployment, increasing the operational flexibility of hydro resources will be a low-hanging fruit to help address growing flexibility needs in some regions,” the report says.

The Brattle report points to hydro storage capacity of 13.6 GW from pumped storage and 25.5 GW of conventional hydro operating in organized wholesale markets in the U.S., along with 60 GW operating outside of organized markets in the northwest and southwest. And the report indicates four constraints to realizing the potential value of hydro plants in today’s energy and ancillary services markets:

  • Market limitations (design, rules, optimization systems, etc.)
  • Bidding and operational practices
  • Resource constraints (pumped storage, pondage and reservoir hydro)
  • Transmission congestion

In a case study of a pumped storage hydro plant operating in an RTO (regional transmission organization) market, the report indicates that compared with historical performance of energy and ancillary services market net revenues of $10 per kilowatt-year, this plant has the capability of revenue of $30 per kilowatt-year through increasing optimization to arrive at optimized market performance. In addition, the report indicates equipment upgrades can further increase the value of hydro plants, bringing energy and ancillary services market net revenues up to $44 per kilowatt-year.

The Brattle Group “analyzes complex economic, finance and regulatory questions for corporations, law firms and governments around the world.”

HydroVision connection

Several panel presentation sessions in the Policies and Regulations track at HydroVision International will cover the value of hydro. In addition, the Market Trends and Strategies track features technical paper presentations on the topic.

HydroVision International is June 26 to 28 in Charlotte, N.C., U.S.