Pumped Hydro Economics Work @ $1m a MW, but not at $2m

15 May 2018 There are three potential revenue sources for pumped hydro. Price arbitrage, ie selling electricity at a higher price than cost of electricity used to pump the water back to the top of the hill. This cost typically has to allow for round trip efficiency of about 75%. That is, pumped hydro is a net consumer of energy. Cap or insurance products: The standard product in the existing market is a $300 cap. This guarantees the buyer of the cap won’t pay more than $300/MWh over a given period for a given number of MW. Ancilliary services. It could be argued that this is code for “the project doesn’t make enough money.” Ancilliary services as we increasingly hear are black start, inertia, frequency control. There is a capital cost for pumped hydro to provide these services and we think that batteries are inherently better suited to many of them. In any case, there just isn’t that much revenue.