In this episode, I talk with Erik Steimle of Rye Development about the new wave of "closed loop" pumped-hydro storage projects. Unlike traditional systems that rely on rivers and dams, these projects use two artificial reservoirs — providing reliable long-duration storage without impacting natural waterways. We explore the economics of these billion-dollar facilities, their 100+ year lifespans, and how they compare to lithium-ion storage.
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David Roberts
Hello everyone, this is Volts for January 22, 2025, "What's the deal with pumped hydro energy storage?" I am your host, David Roberts.
As solar and wind power flood onto the grid, the value of energy storage that can smooth them out and fill in their gaps increases. In particular, there is growing interest in longer-duration storage, at least longer than the 10 hours or so that can be cost-effectively covered by lithium-ion batteries.
One such form of storage — an old form that's been getting a new look — is pumped-hydro storage (PHS), which involves pumping water uphill when there is a power surplus on the grid and releasing it downhill, through generators, when there is a deficit. Think of it as a big, wet battery, with reservoirs of water as the anode and cathode.
Pumped hydro has typically been built where there is a river in just the right formation, which limits its application. But lately, developers have been pursuing what's called "closed loop" pumped hydro, which involves two reservoirs, one high, one low, that exchange water through a pipe. No rivers or dams are involved, which broadens its geographic potential considerably.
That is the kind of project that today's guest is working on. Erik Steimle is the Chief Development Officer for Rye Development, the leading US developer of closed-loop pumped hydro systems.
The company has projects in various stages of pre-construction advancement in Kentucky, Oregon, and Washington. I'm excited to talk to Steimle about the technology and engineering involved, the economics of the industry, and how he views the competition between different forms of energy storage.
With no further ado, Erik Steimle, welcome to Volts. Thank you so much for coming.
Erik Steimle
Yes, thanks for having me on.
David Roberts
When I was first thinking about whether to do this episode, I was like, "Well, pumped hydro, everybody kind of knows how it works. Everybody kind of gets it. There's not that much of it. It's not that much of it happening." And then, you know, as typically happens, I started reading about it, talking to people about it, and now I have 472 questions. So we're going to have to move pretty quick. Describe the type of pumped hydro systems that you build.
Erik Steimle
So, first off, pumped storage, as you alluded to, has been providing energy storage capacity and transmission benefits in the US since the 1920s. There are 43 pumped storage projects that are in operation in the US — 23 gigawatts. Pumped storage accounts for currently over 90% of the country's utility-scale storage.
David Roberts
Yes, almost all of it. And when was the most recent one put into...?
Erik Steimle
There was a small project in California, part of an existing system, that went online just about 15 years ago. But the last major project that was built in the US was built over 30 years ago.
David Roberts
Oh, wow. So we're at the front edge here of another wave of this. Like, the wave really technically has not yet started. There are not a bunch more being built yet.
Erik Steimle
Yes, that's correct. And while pumped storage is currently the backbone of the energy storage system or the grid here in the US, there hasn't been a new one in 30 years. Primarily because there hasn't been a major change in the grid until the last 10 years or so.
David Roberts
Yes, and I have many questions about those changes and what they portend, but one of the things I wanted to ask is, so the pumped storage systems that are up and running now, are they all open loop? Is closed loop a genuinely new thing?
Erik Steimle
It's a genuinely new type of technology. In the United States, there are closed loop projects that have been built elsewhere. So yes, I mean, currently in the US, pumped storage projects include one new artificial pond or reservoir. And then, typically, the lower reservoir is an existing river or lake that's used for the system. The projects that Rye is developing across the US have an artificial upper and lower reservoir. So the system is essentially filled with a sustainable source of water one time. The reservoirs are lined and sealed, and so the water is just moving back and forth between two artificial ponds based on the demands of the grid.
So, these are much more environmentally sustainable projects than traditional hydropower. Typically, they're easier to permit. Also, we have more flexibility on where these types of projects can be located.
David Roberts
Let's start with the environmental. So, just like I think, the main thing to tell ordinary people that they probably don't know upfront is just you're not messing with any natural water systems. You are not an ongoing consumer of water. You fill the pool up once and then you're just moving the water back and forth. So, in terms of ongoing water consumption, you're just compensating for evaporation, right?
Erik Steimle
That's correct.
David Roberts
And that's what, like what per year? How much evaporates? 1%, 5%?
Erik Steimle
It depends, obviously, where the project is located. In the US, some parts of the US, you know, evaporation is much higher than others. In some cases, you know, just building two artificial ponds on the landscape, you can have a net gain of water, right. If it's in a particularly wet environment, which you need to manage that as well, you may need to have some releases. But in general, yes, there is some loss from a sealed closed system in the environment. So, we're typically talking about a couple hundred acre-feet of water per year to operate a project.
So, we'd have some seepage and evaporative losses. That's a really small amount of water when you think about the type and amount of storage a new pumped storage project can provide. Especially since, you know, typically we're contracting this water from an existing municipality or local district that has water to sell for industrial purposes. So, you know, they're looking to sign up new customers, they're looking at how much water are you going to use, what is the tax base and jobs that you are providing with this new industrial use of water and pumped storage is an amazing asset from that standpoint.
You know, a lot of new tax base, a lot of jobs associated with it. This is essentially a domestic source of energy storage that uses relatively little water to operate.
David Roberts
Yeah, so the ongoing water needs are minimal. And the water in ordinary operation doesn't really come in contact with the soil, right, or the water table or any of that? I mean, it's confined to the pipe, more or less, right?
Erik Steimle
Yes, correct. So, you have an upper and a lower reservoir. These reservoirs are lined, so there's either a geomembrane or an asphalt or concrete-type liner. So, the water itself, when it sits in these reservoirs, is not coming in contact with a natural environment. And then, as you said, there is a pipe or penstock that connects the upper and lower reservoirs with the powerhouse itself. You know, pumped storage works just like a traditional hydro project. You know, during periods of time of increased demand for electricity, but the wind isn't blowing or the sun isn't shining, you can release water from that upper reservoir and generate electricity.
And then, conversely, during periods of time when there's excess supply of intermittent renewables, you use that energy to pump water back up the hill and then store it again. The cycle just repeats itself based on demands from the grid.
David Roberts
So, yeah, the reason I started here is just that I think that when people typically hear pumped hydro, the very first things they think of are dams and rivers and needing a bunch of water. So, I just wanted to get it up front: There's no dam, there's no river, and there's a fixed amount of water up front, but no — basically trivial — ongoing water demand. I just wanted to get that on the table.
Erik Steimle
Yeah, that's correct. It's a totally new way of looking at large-scale hydropower in the United States.
David Roberts
Obviously, if you are relying on dams, rivers, or areas with abundant water, all those are geographic restrictions. You are not restricted by any of those. So, what is the geographical space open to you? Like, what are the geographic limiters? Basically, you need a hill. Anything else?
Erik Steimle
Great question. We do need some topographic relief or a hill between the two reservoirs. For Rye's projects, we're typically looking for 500 vertical feet of relief between the two artificial ponds. Although there are pumped storage projects with topographic relief or head that is less than 500 vertical feet, but that's typically what we're looking for. So somewhere between 500 vertical feet and 2,000 vertical feet of head, which, you know, when you take a look at the United States, for instance, there are vast areas in the United States that could accommodate this type of project.
David Roberts
Yeah, we have a lot of hills. And that's it. So, other than that, you could plop one of these down almost anywhere.
Erik Steimle
That's correct, yeah. You need some proximity, obviously, to transmission and load.
David Roberts
Yeah, that was my next question. What are the grid limiters? You need a pretty fat connection, right? And getting a new connection, as Volts listeners are well aware of at this point, takes a while.
Erik Steimle
Yes, I mean, this type of storage does have the same types of constraints with interconnection that other types of storage would have, or that new generation is seeing across the United States. But yes, you need to site this type of project near an existing high voltage transmission corridor, have a source of water, and then of course have the geology necessary to support this type of construction. So, reservoirs and the penstock. But you know, we're seeing more and more a lot of interest and ability to develop these types of projects on lands that are often passed up for other types of energy generation.
So, you know, we have a new project that we're pursuing in Kentucky on former mine lands.
David Roberts
Yes, very cool project. This is the abandoned mine, right?
Erik Steimle
Yes, that's correct. The Lewis Ridge Pumped Storage Project. It's in Bell County, Kentucky. It's located at the site of a former coal mine and could help replace energy industry jobs that were lost as the coal plants retired. So, a lot of former mine sites offer ideal conditions, including elevation changes, access to transmission that's often there, available water sources, and of course, a local workforce.
David Roberts
Yeah, yeah, true. And then I guess you need some connection to load. Although, I guess if you're plopping down near a big transmission connection, you're probably pretty close to load if you find one of those.
Erik Steimle
Yes, of course, willing landowner, local support. But I mean, you know, these types of storage projects don't have the hard rock mining or the foreign supply chain issues that we typically talk about when we're talking about batteries. The largest costs for the project are concrete, steel, and labor.
David Roberts
Are the pools made of concrete?
Erik Steimle
Yes. So, the reservoirs, you know, are typically a cut-and-fill type reservoir, and then the surface, the interior surface of the reservoirs, is typically a concrete or asphaltic concrete lined facility.
David Roberts
And then, steel pipe. But that is a lot of concrete.
Erik Steimle
Yes.
David Roberts
I mean, two giant pools. It is substantial CapEx we're talking about, is it not?
Erik Steimle
It is, yes. So, one of the disadvantages of pumped storage compared to lithium-ion is the initial CapEx of the project. You know, most of the projects that Rye is looking at are in excess of a billion dollars. In fact, most of the pumped storage that's being looked at in the US are projects that range from, I would say, 1 to 3 billion dollars. Now, these are large projects. So, we're talking about, you know, storage projects that could provide on-demand capacity or storage for a long period of time for entire urban regions, you know, so they are significant in size. And the one way to think about this that's different than batteries or lithium-ion batteries is just the long life of pumped storage.
David Roberts
I was thinking through the technology, and it's like, "Well, pools, you know, I think we've mastered those, and steel pipe and generators like these are all very extremely well-understood technologies." And the sort of dams, the hydropower projects that use these same technologies, there are some that are, you know, 100 years old, 150 years old. So, like, there's no reason once you build one of these things, it couldn't just run forever, right?
Erik Steimle
That's right. The lifespan, or expected lifespan, for new pumped storage is well over a hundred years. And so, while there is a higher upfront cost, the overall cost of the project is significantly lower than any other type of energy storage. And that's, you know, something that's held up for the hydropower industry by DOE and lots of others.
David Roberts
Right, well, that just sort of depends on the time horizon of your money.
Erik Steimle
Yes.
David Roberts
Doesn't it? Like, I mean, if you're amortizing over 100 years, then obviously you're going to come out, you know, you're going to come out ahead. But like, you're not going to find capital that's 100 years patient. So, you know what I mean? Like, you kind of have to find some patient capital to do this, don't you? You're looking for infrastructure-type capital, right?
Erik Steimle
Yes. Although you know —
David Roberts
Like is there any VCs involved in any of this?
Erik Steimle
So, Rye's capital comes from two sources. Rye is owned by EDF Inc. and Climate Adaptive Infrastructure. These are two global leaders in utility-scale energy storage investment, including construction and operation of pumped storage. So, we're well capitalized to actually pursue these types of projects.
David Roberts
I see.
Erik Steimle
And there's more and more utilities that are interested in diversifying storage and thinking about storage diversity when we're talking about grid reliability, resource adequacy that are looking more long term.
David Roberts
And do you find that utility capital is patient in the way you need?
Erik Steimle
So, we're finding that it is more and more, and I would argue that it was only a few years ago where there were really only a handful of utilities seriously considering contracts for new storage. And that, of course, has changed to be something that utilities across the United States are looking for at this current time. And as part of that, we're seeing load increases across the US, primarily tied to AI and data centers. But there are other reasons as well. So, as we look at load increases and needing to bring storage into the system to deal with new sources of intermittent renewables and with coal coming offline, there's a real new focus on rates and rate increases.
And so, being able to, for example, bring in a project that, from a degradation standpoint, has very little degradation over a long period of time, you know, something that has relatively low cost over a longer period of time, is of interest. So that could be a, you know, a 30-year power purchase agreement or a utility acquiring one of these projects as part of their resource mix where they can have it as a long-term asset.
David Roberts
Right. How many? I mean, you're not... None of your projects are currently under construction. I want to talk about the timeline later, but none of your projects are currently under construction. How many are in the pipeline somewhere?
Erik Steimle
Yeah, so in the US right now, there's more interest in new pumped storage than ever before. These aren't just Rye's projects, but there's over 90 pumped storage projects that are proposed in the FERC queue. That's over 50 gigawatts across the United States, including Hawaii and Alaska. And Rye Development has the first construction-ready project of all these projects being looked at. But a lot of these projects are in the early stage of design. And that's in part by what I was saying earlier: There hasn't been a strong interest in vast amounts of storage until fairly recently.
And a lot of these projects are projects where there's a focus, or an interest, or a market need in the 2030s. So, we're just sort of seeing the start of real growth here.
David Roberts
Are most of these upcoming projects closed loop? Like, is there sort of an industry-wide shift happening to closed loop or is it just a site by site type of thing?
Erik Steimle
It is site by site. There are a lot of these projects that are closed loop, but there are a number of projects being proposed where they're part of an existing hydropower system. So, you've got a licensed, fully operating system, and a utility or other developer is looking at just adding an additional upper reservoir to that system.
David Roberts
So you have an operating dam, you just stick a new reservoir up on top of a hill somewhere and pump water up and down to it, but still part of the same project?
Erik Steimle
Yes.
David Roberts
What is the round trip efficiency here and how does that compare to on one side, lithium-ion batteries, but then on the other side, sort of your other competitors in the long duration storage space?
Erik Steimle
So right now, pumped storage is by far the most efficient form of long-duration energy storage. Most pumped storage is somewhere in the 75 to 80% range in round trip efficiency. So very efficient. And one of the differences about pumped storage compared to some other types of energy storage technologies is that we have almost 100 years of projects to draw on globally to prove out that efficiency. But compared to, you know, lithium-ion batteries, certainly there are lithium-ion batteries that have efficiencies above 80%. But in the long-duration storage space, certainly pumped storage is the lowest cost, most efficient of those forms of storage.
David Roberts
Well, what about specifically? Because I guess you'd call this a subset of gravity batteries. I mean, it's using gravity in some sense. So, why move water rather than blocks or sand or, you know, there's all sorts of gravity batteries popping up all over here that lift and drop various things. Did you like assess all those and decide on water or what? How do you think about how those compare with one?
Erik Steimle
Another great question. And we have spent some time, or I've spent some time, listening to some of the other proposals out there for long-duration or gravity storage. And look, I certainly think that there will be other technologies that are developed. Some will probably stay at the pilot stage, even if they're simple forms of gravity storage. And some will move on and be adopted. Rye specifically is set up to pursue new low-impact hydropower and pursue new pumped storage in the US, so we are a team that has a lot of experience in developing new hydropower and we think our niche is pursuing this old technology, but bringing it to the current market in a way that's valuable for utilities, ratepayers in this current environment where we see fossil fuels coming offline, renewables getting added, and a real need for a low-cost, long-life domestic source of energy storage.
David Roberts
I've heard about alternative forms of pumped hydro where you use underground caverns. In other words, you don't find a hill instead for your gravity. You just dig a big shaft, you just dig a big hole. Have you looked into that at all? Is that, or would that, open up sites that are not accessible to this? Like, what's the deal with that type?
Erik Steimle
Yeah, there are some current proposals out there for that. None of Rye's current projects propose underground caverns or more exploratory types of technology or configurations of the reservoir system. Ours are very straightforward. Again, just sort of a simplified upper and lower pond, if you will, that's lined and moving water back and forth. But you are correct, there are other groups looking at smaller scale pump storage, looking at underground storage that wouldn't require the topographic relief.
David Roberts
That would really open up the geography.
Erik Steimle
Correct. Yeah.
David Roberts
If you could do smaller underground.
Erik Steimle
Yeah, there is a group called Quidnet that is specifically looking at underground pump storage and looking at small-scale technology that could be utilized throughout areas like the Midwest, right, where there isn't topographic relief.
David Roberts
The one environmental question I forgot to ask, and I think it's probably obvious, but it's just water, right? Is there anything else in the, in the water?
Erik Steimle
No, it's just a contract for water. And again, you know, typically we are sourcing water from a long-term sustainable source of water on the property itself or a local municipality.
David Roberts
Could you theoretically use like salt water or dirty water, sewage water? Like do you need a particular grade of water?
Erik Steimle
No, you do not. You could certainly use gray water. And there is pumped storage that currently exists. There's a project in Japan that is a saltwater pumped storage project. The lower reservoir for that project is the Pacific Ocean.
David Roberts
Interesting. And one other question about these open ponds: You know, when I threw this out on Bluesky, one question that came back several times was, "Have you thought about integrating any other technologies into this? For instance, putting solar PV over the reservoirs?" You know, there's all this talk about floating PV these days or like covering parking lots, you know, with canopies, solar canopies, integrating solar on site at all. And/or using that giant mass of water as thermal storage for, I don't know, some heat load nearby. Have you thought about integrating other stuff?
Erik Steimle
That's a great, great question. So, we haven't considered the thermal load question that you're asking, but we have taken a look at covering or at least providing some type of solar resource on either one or both of the reservoirs in our project areas. One is an additional on-site source of generation, but two as a way to decrease evaporation. We have two projects that we're looking at now that will likely incorporate floating solar as part of the pumped storage project.
David Roberts
Interesting. Won't that be fun? Do you build in cold climates and if so, what do you do about freezing?
Erik Steimle
Yeah, so pumped storage is certainly a resource that is constructed and operates and is quite reliable in cold areas. I mean, you can just point to the Alps in Europe where pumped storage has been the choice of storage for Europe now for 20 some years. I mean, a lot of the new construction of pumped storage has been in Europe and has specifically been in the Alps. When you think about icing or the issues associated with the cold, one thing that's helpful with pumped storage is that you're not retaining water for very long periods of time. You're typically moving water back and forth, you know, every couple of hours or cycling things a couple times a day.
So, it doesn't give the ability, or you don't have some of the typical freeze issues that you would.
David Roberts
I see. Just because the water's in motion more?
Erik Steimle
That's correct.
David Roberts
And so, you mentioned cost and I guess it gets a little devilish here comparing things. It's a little different to know what time horizon, based on power, whatever. So, you say over the lifespan of one of these installations, they are cheaper than any other form of energy storage?
Erik Steimle
Yes.
David Roberts
But they're more expensive up front.
Erik Steimle
That's correct.
David Roberts
In terms of just CapEx, so how big of a challenge is that to your business? Like, do you know what I mean? I'm constantly, when I'm talking with people about clean technologies, running into this, you know, the same shape of dilemma over and over again. Right. More upfront CapEx, savings over time. How do you find the sources of capital that care about that argument, that will hear that argument? Is that a challenge for you?
Erik Steimle
No, it absolutely is, and it is the right question, I think, for pumped storage. And look, you certainly we talked about the long lifespan of the project, 100 plus years. But you don't need 100 years, you don't even need 50 years to make the economic case. Depending on the project, its location, and the needs for storage in a geographic area, to make the case from a cost standpoint for pumped storage. Just to give you some numbers: The US Department of Energy has consistently described pumped storage as the long-duration energy storage technology with one of the lowest levelized costs of storage.
So, the DOE has pegged that between $70 and $170 per megawatt hour. And that's from a report I think in 2023. Rye Development is currently working with another pumped storage developer, rPlus Renewable Energy, to provide an updated analysis for new pumped storage projects that are being proposed across the US.
David Roberts
Yeah, these closed loop, are they going to change the economics substantially? Like are they cheaper? Is it going to be a different economic picture when they come into prominence?
Erik Steimle
Yeah, so I mean, just because they have two reservoirs instead of, you know, a project that might just add one upper reservoir, those types of projects do cost more. But we're doing this analysis for Lazard's upcoming 2025 LCOS (Levelized Cost of Energy Storage) report. And what we're finding in the analysis, and of course more to come, is that projects that are slated to begin construction in the next couple of years in the US, so this is pumped storage, both closed loop and open loop, projects that would be online late this decade or in the 2030s, are right within that range that DOE has consistently described for pumped storage.
So, we're talking about projects with a levelized cost of storage in the $70 to $170 per megawatt-hour range. So, you can compare that to lithium-ion and, you know, in some cases, that's more expensive, but in other cases, it's not.
David Roberts
"Well, it sort of depends on how long you're storing in your lithium-ion. Right. Which is what kind of makes these comparisons tricky because in some sense, being the cheapest long-duration storage option is great, but there just aren't a lot of them. You know what I mean? That's not a heated competition, it seems like to me — and this is another question I got off Bluesky a million times, so I'll just ask it straight out — like, it seems like to me what you're worried about is not that electrolyzing hydrogen and then using it to run power plants is ever going to catch up to you cost-wise, you know what I mean?"
Like these other long-duration or like flow batteries, but lithium-ion people used to say, "Oh, it can do up to four hours economically," and then it was six, and then it was eight, and then it was 10. And now, I think people are saying 12. The cost of lithium-ion batteries is only going in one direction. It's just going down, down, down, down, down. And so, it's not just how much does lithium-ion storage cost today, it's how much is lithium-ion storage going to cost in whatever 10 to 12 years when one of these projects is actually built and running.
Like, are you confident it will still be cheaper in a decade? I guess, I guess, even if you're not confident, are the financiers confident that it's going to be, you know what I mean, that lithium ion is not going to catch up even in the sort of 12 to 24 hour world?
Erik Steimle
Yeah, I mean, so that is a great question. I think that for Rye, we're confident that lithium-ion is not the only type of storage that's necessary when we look ahead in the next 15 or 20 years. I mean, there are things that pumped storage can provide, whether you're talking about, you know, black start or specific capabilities during emergency outages, or talking about reliability, resource adequacy, that pumped storage is not even comparable to lithium-ion. But does that mean that pumped storage is always going to be a winner over lithium-ion? Certainly not. And I, I think you can look to certainly the short duration storage projects that have been contracted.
So again, probably talking about two and four-hour projects, lithium-ion is a great storage solution there. But when we're talking about storage for 10, 12, 16 hours or more, and then talking about something that has the ability to cycle again over and over with very little degradation over decades of time, this is a technology that a utility is going to want to have as part of their storage resource stack, if they can have it right, if they have the geology and geography to support this type of project.
David Roberts
Yeah, it's got that sort of infrastructure stability vibe to it. But again, about the timing of storage, I do have some questions. When you look at the website, it talks about its advantages over lithium-ion batteries, specifically its ability to operate in this 12 to 24-hour storage period. However, when you look at the project sites themselves, they're saying that they're going to offer like 8 to 10-hour storage, which is something that lithium-ion batteries could do. So, I guess I'm just curious, in operation, are they going to be operating as short-term batteries? Are they ever in practice actually going to store energy for 20 or 24 hours? Do you know what I mean?
Erik Steimle
Yeah, so in operation, these projects could store energy for longer durations of time, for sure. The actual capacity at which you'd operate the project would be less if you were essentially storing or looking at it as a longer duration storage product.
David Roberts
But there's no time limit. It's just water sitting in a pool. So, you could just leave it sitting up there till kingdom come. I mean, theoretically, you could store it forever as long as you wanted to.
Erik Steimle
Yeah, that's correct. The time allotments for storage, like 8 hours, 10 hours, we have a project we're almost done permitting in Washington State, that's 12 hours. Those are based on resource plans or RFPs or market analyses for individual utilities in those geographic areas. What are they interested in? What sets pumped storage apart for them from lithium-ion? What are they interested in? So, it doesn't mean that you couldn't use those projects for longer periods of storage. It's just that's how we've designed the projects because we're essentially in the market of developing something that's valuable for those utilities.
David Roberts
This is something I've run into when talking to other long-duration storage type people, which is that everybody seems extremely convinced that we're going to need long-duration storage. It's sort of like conventional wisdom at this point. But there doesn't really seem to be an extant market for long-duration storage. Nobody's really paying for long-duration storage right now. So all these long-duration storage technologies are kind of having to compete in the short-duration game while they wait for this market to show up. So, I'm just thinking, I guess I'm just wondering if that sounds right to you? Is there, as you look around, a market for storage in the 12 to 24-hour period?
Erik Steimle
That's correct. I mean, I think when you look at utilities that are procuring storage, they're looking to procure short-duration and the easy projects first, and the more complicated or longer-duration projects later. And it's not just that our projects are complicated per se. I mean, again, we're proposing projects that are primarily two artificial ponds on existing brownfield sites, if you will. But as more and more renewables come online and fossil baseload resources retire, long-duration is something that is needed. But you're correct, the market today is pretty shallow.
David Roberts
Yeah, and is that just a limiter on your growth as you see it, or are you sort of trying to persuade utilities to think longer term than that?
Erik Steimle
Yeah, I mean, so we certainly have to compete with batteries, and we are certainly limited in where we can have projects or pursue projects to areas where there are utilities that are forecasting a need for this type of storage or this type of capacity, or have a particular interest in an energy storage resource that is domestic, local, hits certain thresholds for economic development. Look, in comparing job creation, economic development, and domestic jobs specifically, all the way from the manufacturing stage through the four-plus year construction effort for these projects, it's not comparable. There's no lithium-ion project that's comparable.
David Roberts
Right. But if you're an economist, you look at that as a demerit. You can get more storage with less labor with lithium-ion. So, I guess, in economic development terms, if you're trying to sell it to a region, that's attractive. But in market terms, I'm not sure that's so attractive.
Erik Steimle
Well, again, if we can provide a storage resource that is as cheap as or cheaper than something that is comparable in an RFP or a project that is in a particular location that's really valuable to a given utility — I mean, look, the utilities are our customers in this. That's how these projects succeed in comparison to others. But I mean, to your point, it is very competitive and I think the storage market will remain competitive in the years to come.
David Roberts
Yeah, and in terms of how these facilities are meant to make money, it's just arbitrage, right? It's just storing when energy is cheap and generating when energy is expensive. Are there other revenue sources?
Erik Steimle
Yeah, so historically, pumped storage did operate and work just on arbitrage. The projects that we have, the most mature ones on the West Coast, are situated to have long-term contracts with utilities. So, a long-term power purchase agreement where they're essentially entering into a tolling type arrangement for a price and can use the facility as they see fit. Pretty similar to any other type of tolling arrangement a battery project, lithium-ion or otherwise, would enter into with a utility.
David Roberts
Got it. And so, one thing that lithium-ion has going for it relative to a bunch of other things is it's small, it comes in very small units, it iterates very rapidly, and it's very modular and replicable, etc. All these sort of characteristics of a technology that tend to induce innovation and thus falling costs. So when I look at a project like this, it's just two pools, two concrete pools and a steel pipe and a generator. On one hand, the benefit of that is those are all very well understood, all relatively cheap, all can be relied on to run for a century or more.
But I guess the downside is, it's hard to see where there's going to be much technical advancement or falling costs. Am I wrong about that? Or do these things pretty much cost as much as they're likely to cost and there's just not a lot of room to bring that down?
Erik Steimle
Yeah, I mean, one of the benefits that pumped storage has is that we certainly understand what the costs are. You know, whether it's steel, concrete, construction, I mean, most of the energy storage that's been developed of utility scale or a large portion of it globally, a lot of that has been pumped storage. Now, we haven't been developing a lot of pumped storage in the US, but elsewhere in the Middle East, Europe, Asia, and others, they have been developing a lot of it in the last 10, 15 years. And so, we fully understand what those costs are. Certainly, there are some costs on the technology side, the turbine equipment that have come down.
But you are right. I mean, this is not a static cost here, but this is something that's well understood, and there isn't an expectation that the prices are going to continue to fall for pumped storage. I would argue that there's lots of individuals and developers that also think that lithium-ion will probably not continue to fall forever as well, given the hard rock mining and supply chain associated with those types of batteries and also competition for their use.
David Roberts
Yeah, well, that's a big multi-billion-dollar gamble. A lot of people would keenly like to know just whether that's true or not.
Erik Steimle
But I think where pumped storage often has its niche is in places, especially in the US, where utilities have existing hydropower or are jealous of neighboring utilities that have existing hydropower, which is of course like the original form of storage. I mean, it is their lowest cost resource, it's carbon-free, and it provides a lot of flexibility. So, you know, if you're looking at the need for storage, wanting some storage diversity, you know, from a cost-benefit scenario, if you are looking longer term, I mean, pumped storage is a really, really valuable resource. You don't have to throw it out and replace it every 20 years.
So, if you're a utility commissioner, I mean, that's something that you identify right away. You know, amongst other things, pumped storage has the lowest contribution to greenhouse gas emissions as well compared to any other type of storage that's currently looked at.
David Roberts
Now, I was going to mention that in the context because this is another thing that comes up when people think about hydro is the methane displaced when you sort of industrialize a river ecosystem. You guys don't have that problem, right? You're just like digging a hole?
Erik Steimle
That's correct.
David Roberts
So the whole methane thing is just not kind of just not an issue for you?
Erik Steimle
Yeah, it's not an issue at all for a waterway like this for closed-loop pumped storage.
David Roberts
But to get back to the cost question, so there's no reason to think that like your fifth project that you build is going to be substantially cheaper than your first project? Like these are relatively predictable and stable costs?
Erik Steimle
That's correct. And that is their benefit. The same thing is that the projects also provide some storage benefits that lithium-ions cannot provide.
David Roberts
And so, let's talk then about a subject that comes up a lot here on Volts, which is the sort of red tape dilemma. You know, I'm sure if you've been following public discussion lately, there's, you know, everybody's got a lot of angst about the fact that it takes forever to build anything. In the US in particular, it's very hard to build big things. There's all these different processes and environmental reviews and approvals and processes, etc., etc., etc. I'm just guessing, knowing none of the details, I'm guessing that a very large project like this involves a whole heck of a lot of that.
So, maybe you could just sort of describe what the bureaucratic journey is and how long does it take? Like, from the moment you sort of identified the Lewis Ridge Mine — you're like, "I want to build there", what is the process and how long does it take?
Erik Steimle
Yes, from the moment that you conceptualize a project to the time that it could be online and in commercial operation, it is an 8- to 10-year process in the United States. And that is particularly unique to the United States. That's in part why a lot of pumped storage, and currently pumped storage, is being constructed elsewhere in the world. And you know, we have a handful of construction-ready projects in the US, but none have been kicked off.
David Roberts
I'm guessing it's faster in the, in other countries where they — ?
Erik Steimle
Yes, everywhere else in the world, it's faster than in the US. Pumped storage is somewhat disadvantaged compared to other energy storage technologies in the US because it's federally regulated.
David Roberts
That means more red tape, or less.
Erik Steimle
Yeah, so the Federal Energy Regulatory Commission is responsible for permitting compliance for hydropower.
David Roberts
So you're not messing with state regulators at all?
Erik Steimle
No, some states do have regulations for this type of energy project or energy storage project, but some states don't. It kind of depends on the state. So, as you can imagine, states like California or Washington or other states on the coasts do have a state process in addition to federal. And then, some states have no state process associated with permitting like this. But the federal process in the US for a new pumped storage project, even if it's two artificial ponds on the landscape, is roughly a five-year process in the US.
David Roberts
Maybe this is a tender subject for you, I bet. But these closed-loop projects do not run into a lot of the environmental issues and questions that you run into when you're dealing with rivers and dams, basically. Are they assessed differently, are they assessed separately, or do they end up having to jump through all the same hoops?
Erik Steimle
They are not assessed differently. Despite the fact that, you know, the projects aren't even close to having the types of impacts that would happen if you were building a large dam on, you know, a large river system. They are still assessed the same way. You still have to go through the same process. And that is why it takes so long.
David Roberts
Spell it out a little bit. 8 to 10 years — doing what? Like, doing what? The Lewis Ridge Project is supposed to start in 2027. Like, what has been happening in those 8 to 10 years?
Erik Steimle
Yeah, so the Lewis Ridge Project is a particularly interesting project because the project was able to win a Department of Energy grant, so $81 million. The purpose of that grant, in part, is to expedite the period of time between the conceptual idea of the project and not just startup construction, but COD. It is recognizing that the US is unique; this process is slow.
David Roberts
How does money help? Like, you still gotta — are you just paying for tests and things like that?
Erik Steimle
Yeah, so typically, why it takes pumped storage so long is that a developer will work through the four to five-year permitting process before it invests a lot of the large dollar amounts to get the project construction ready. And so, you're looking at a four to five-year permitting timeframe and then a four to five-year period of time after permitting before the project comes online and is commercially viable.
David Roberts
But why, Erik, what's happening? What's going on in those — demystify this for me. What's going on in those five years? Who is doing what?
Erik Steimle
Yeah, the federal permitting process requires layers and layers of public meetings, agency meetings, applications, and information that you provide and then also put out there for public review. It starts at a conceptual level and then it builds over time where there's feedback loops over a series of years on the various types of studies that you need to do. Now, for a closed-loop project on a brownfield site, you may not need to do any of the usual studies associated with building a new hydropower project, but the timelines and the process for engagement still apply. So that's why it takes longer here than anywhere else. So, on the positive side of that — if there is one to talk about — the process is so long and comprehensive and requires some of the public input that you know, you have a community project or a project that community —
David Roberts
For God's sake, after 10 years, I would hope you would at least have certainty that you can build your project!
Erik Steimle
Yeah. So, there has been policy reform afoot in the last Congress — of course, you know, we're in a new year, a new administration — there was an effort to speed up or reduce the permitting timeline for closed-loop pumped storage. Specifically for closed-loop pumped storage and an acknowledgement of how valuable this resource is as a domestic storage resource in the US and its potential to reduce that total permitting timeline to three years. Of course, permitting reform as we know didn't happen in the last Congress, so we'll have to see where we head in the new Congress.
David Roberts
Would you, I mean, there's an element of feelings to all this, but do you feel like you have pretty decent bipartisan support for this? I mean, I'm guessing that just like getting on the radar at all is your main challenge. Like, there's not some anti pumped storage faction out there, is there?
Erik Steimle
Yeah, you're correct. There's bipartisan support not just for pumped storage, but I would say hydropower in general. It is one of those resources that both sides of the aisle understand its value. It's low cost, it's carbon-free in many places. Existing hydro is a defining resource of places where people recreate. So, you know, it's bipartisan if not because it provides flood control and irrigation in addition to electricity. But it's something that has been and will continue to be in many cases the lowest cost on-demand form of carbon-free electricity. And don't underestimate the value of, you know, a local reservoir to a resident and their ability, maybe in the future, to plug their truck into it as their source of fuel.
I mean, it seems funny to say, but it's a valuable concept.
David Roberts
And the jobs too. But just to be clear, like, I always want to clarify this. On these big projects like the Lewis Ridge project you're talking , it says 1,500 jobs for the three or four years that it's being constructed. Right. Like there's a big flood of construction jobs. But if it's just two pools and a pipe carrying water between them, I can't imagine that it is going to require an enormous amount of ongoing jobs. Is it? Like, the jobs are mainly short term? That's not a ding on it, that's not a problem or anything, but that's just the shape of the situation.
There's not going to be tons and tons of ongoing jobs, are there?
Erik Steimle
Yeah, so the number of jobs associated with a permanent operation are right around a couple of dozen for a facility like this. So, you're right, there's not thousands of jobs during long-term operation of the project.
David Roberts
I mean, it's infrastructure. It just, it's supposed to sit there and —
Erik Steimle
Yeah, I mean, but you'll also find that the labor force in places like southeast Kentucky is well equipped to do a lot of the jobs associated with the construction of this type of facility. I mean, this is a large civil project and there are lots of areas where they have a workforce that can essentially be put to work. Right. That is well equipped to begin work on these types of projects. You know, additionally, the longer construction period here is valuable to apprentices and the building trades. You know, attrition is real. And it's harder and harder for the building trades to find projects where they can bring an apprentice in. They can work the entire time on a project.
David Roberts
Right. So, you could, like, study up and become a professional, basically, over the course of this.
Erik Steimle
Correct. While going home to a family each night in the same location, that's pretty valuable for labor.
David Roberts
Well, it seems like a pretty obvious win for the locals. So, I'm just wondering, are you — is the word out? Like, are you getting calls? I mean, given the geographic flexibility of this, you could put it almost anywhere. There are now congested grids all over the place. People need storage all over the place. People are worried about foreign content in batteries, etc. So, it seems like this should be your moment. Do you have a big pipeline?
Erik Steimle
I mean, yes, as I alluded to earlier, there is a large pipeline of proposed pumped storage in the US. I would say that there are lots of municipalities, lots of utilities in the US that are now focused on developing their own pumped storage as part of their storage needs.
David Roberts
Oh, like, as municipal infrastructure.
Erik Steimle
Yes. Yeah. Yes, we do get the occasional call. Of course, there are places that are, you know, looking at the Lewis Ridge project or some of our other projects and saying, "Why don't we have one of those projects here? We have the transmission. We've got a lot of new load demand from data centers. This is the type of storage project we could have. And look at the job creation." So, we do get some of those. But it's certainly not just Rye that's out there in the pumped storage space. There's a lot of new interest in pumped storage in the US.
We're just slightly behind in the US in comparison to other parts of the world that has been adding a lot more storage than we have been.
David Roberts
A familiar story. Okay, well, as a last question, then, I just want to talk about size: what are the size limitations? On one end, how small could one of these things be and still be, like, reasonable, viable to build? Sort of how distributed in small scale could it get? And then on the other side, is there an upper limit, or do we have a good sense yet of the bounds?
Erik Steimle
Yeah, I mean, so there are relatively small pumped storage projects. Rye is focused on pumped storage projects primarily in the 300 to 700 megawatt range, although we do have one that's larger than that. And Lewis Ridge is slightly smaller than that. But we think that that is a, you know, a range where the project makes quite a bit of sense. So we're focused on utilities that have or, you know, and integrating the project in an area where there's a demand for hundreds of megawatts of storage and capacity that this project could accommodate. There are projects that could be sited that are much larger than that.
But again, if you're getting to projects that are 500, 1,000 megawatts or above 1,000 megawatts in size, you're talking about probably multiple utilities that would need to participate in the project. And that can get somewhat more complicated.
David Roberts
I'm guessing like somewhere in China there's the biggest one of these in the world, like is China building behemoth pumped storage?
Erik Steimle
There are definitely new projects that have been built and brought online that are in the thousands of megawatts.
David Roberts
Wow. I wonder what that looks like.
Erik Steimle
Yeah, a lot of those are open-loop systems. But, you know, just to give you an example of size, our project in Washington State, the Goldendale Pumped Storage project, this is a 1200 megawatt, 12-hour project. The largest features are just two 60-acre ponds.
David Roberts
Yeah, we didn't talk about land use, but that's very little land for a lot of capacity there.
Erik Steimle
Yeah, it's a considerable amount of storage and capacity for a region that's capacity short. You know, we're talking about a considerable amount of additional storage that just Washington State, not including the rest of the Pacific Northwest, needs to bring online in the next decade. So yeah, 1200 megawatts, 12 hours of storage, two 60-acre ponds, that's enough storage to provide 12 hours of on-demand electricity to every residence in Seattle.
David Roberts
Wow.
Erik Steimle
Yeah, two 60-acre ponds.
David Roberts
Wow. And one facility. And I'm guessing that, because of the simplicity, you could adjust the size of these relatively easily. Like, you could just make the pools bigger, right?
Erik Steimle
Yeah, you could make pools bigger. You know, other projects, when they've wanted additional storage time, have added an additional upper reservoir over time or contemplated an additional reservoir to provide additional storage time or capacity at the project. So yes, again, these are large civil projects, but they are somewhat simple in that you're essentially just moving water back and forth based on the grid's demand.
David Roberts
Yeah, pretty old school.
Erik Steimle
Yeah.
David Roberts
Well, super fascinating, Erik. I really appreciate you walking us through this. This has been sort of in the corner of my eye for years now. So, I'm glad I finally dug in. And good luck with all your projects.
Erik Steimle
Yeah, thank you so much for your time today.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
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