Pumped hydro is the flavour of the week

Following an apparent revival of the Spirit of Ireland on Monday, it’s now Organic Power‘s turn to look into pumped hydro to store electricity, using salt water and the Atlantic Ocean as the lower reservoir.  I have not changed my mind during the week or indeed the year, but Organic Power works at a more realistic scale than Spirit of Ireland; Organic Power works with experienced people; and it is does not seem to be looking for public subsidies.

Best of luck to them. Let’s hope their current investigations spring a surprise.

32 thoughts on “Pumped hydro is the flavour of the week”

  1. I doubt very much that no public subsidy is required to get this new proposal off the ground, given its reliance on wind for generation. And no use trying to pretend that the directives on generation sources (requiring distributors to buy a minimum amoun of electricity from “alternative sources” – read wind) do no represent subsidy.

    Even with massive storage capacity, these wind backed storage schemes can easily shown to remain so exposed to variability in wind conditions to render them ineffective to meet base or even peakloads.

    Now, if they had a connecter to French nuclear plants, such “batteries” might work well to recharge every night from excess capacity at knock down rates. Now that would be an idea iwth genuine potential economic benefits.

  2. Geckko,

    you’ll have to help the French build a few extra nuclear stations then. This winter they came perilously close to running out of power a couple of times and wound up importing electricity themselves a couple of times this winter. Le Monde report is here: http://www.lemonde.fr/planete/article/2009/12/14/le-reseau-electrique-francais-est-dans-une-situation-tendue_1280583_3244.html on that occasion.

    This should not been seen as a de facto support for the Spirit of Ireland proposal (at least – I know a lot less about any other proposals), I think it’s nuts; however, an interconnector to France would have to come with some extra power capacity there also.

  3. @Geckko
    Sure. The business case for pumped hydro rests on wind subsidies.

    The question here is whether pumped hydro deserves subsidies as well. I do not think so. It should make money on the market for power reserves. If it cannot turn a profit there, it should not be build.

  4. Richard,

    I’m afraid I can’t share your enthusiasm, especially not after perusing their website and even if they’re not looking for public subsidies.

    What is it with these energy companies that they feel they have to root their endeavours in climate change dogma? It’s a bit like a manufacturer of brass candlesticks claiming authority for his enterprise from the Pope.

    First, I’m no longer convinced that either the conclusions of the Stern Report nor the IPCC command the credibility they once enjoyed. Second, judging from recent polls, public opinion is no longer all that convinced by climate change advocacy either.

    There’s a strong case for renewable energy solutions and the switch from fossil fuels dependency as soon as reasonably possible, and at the least economic cost. I believe that projects like Spirit of Ireland or this Organic Power company, or anyone else in that game, have to make their case on its own merits, in terms of energy, economic costs/benefits and environment costs, and leave this ‘green’ PR fluff to one side, if they are to have any credibility, or indeed any prospect of long term commercial viability.

  5. I’d echo Veronica’s point. I was recently at a lecture by Irakli Menabde (manager of a pretty big renewable energy fund) and his pitch was a lot more convincing. When asked about how AGW (and recent controversy associated therewith) affected his fund, he basically said he didn’t care too much about the climate change debate. He saw renewables as a genuine business opportunity and a long-term imperative regardless of policy. It was refreshing.

  6. @Veronica/Marcus
    We agree, actually.

    Ignore the green fluff.

    If they have a business case that convinces private investors and that does not rely on public subsidies, then I’m all for (not that it matters in that case). If not, not.

    For the record: I do not think they have a business case, so I did not buy their shares.

  7. Richard,

    Can you point me to any large scale energy systems project that doesn’t require government subsidy?

    I thought that private investors tended to shy away from this type of investment because (a) the timescales for a guaranteed return on the investment were too long, (b) political commitment could not be guaranteed (e.g. short political cycles with possible changes in government undermining confidence that next government would continue supporting same energy policies as previous administration), (c) insecurity about the viability of the technology.

  8. @Richard I am not sure if this point is dealt with elsewhere..
    A few years ago I visited a pumped hydro power plant in Scotland near Oban, where in a guided tour it was explained that the facility consumed more electricity than it produced. The economic logic of this apparent contradiction, depended on the cost difference between electricity at low consumption periods i.e night vs daytime costs. My understanding was that also because of the difficulty/impossibility of reducing output of nuclear generators at night, it meant that their (nuclear) excess could be used productively to fill the reservoirs of the Oban facility.
    Maybe the nuclear option is also on the cards here, where the pumped hydro in Mayo would be later made cost effective by fulfilling a similar function.
    (The economic benefits due to tourism – was not outlined)

  9. I think that the climate change issue influences the business case when a price for CO2 emissions is considered.

    What I’d like to hear views on is the issue of energy security and can this be somehow included in calculations. Any supply disruption to gas would make Ireland very undesirable for industry. Can this uncertainty be priced?


  10. @Aidan
    Pumped hydro is mainly used for regulation rather than arbitrage. You can turn up the volume in minutes, and thus meet unexpected surges in demand or drops in supply.

  11. Quite apart from non-power use of gas, Ireland is heavily dependent on gas-fired power generation. The irrational prohibition on nuclear and the probability that any new coal-fired generation would have to be CCS-ready means that these options for base-load generation are excluded. And even if rationality were to prevail, the lead-time to commissioning means they would have no impact in the short to medium term – say up to 15 years or even longer.

    Gas security of supply requires kit with the integrity and capability to maintain supply and an assurance of gas supplies. Ireland has, and will have, kit coming out of its ears. There are two interconnectors from Scotland, an interconnector from Scotland to Northern Ireland and a north-south pipe. Shannon LNG will be on stream in the near future and Corrib gas will flow eventually. The irrational sequencing of these investments means that consumers will be paying for a lot of unused kit, but economic rationality and energy policy are strangers in Ireland.

    Due to the recession-induced fall in demand and an increase in unconventional gas supplies in the US there is excess supply to the EU market. How long this will continue is anyone’s guess, but it’s having the predictable effect as major suppliers are reducing prices to maintain market share. Wth the recent election of President Yanukovych in the Ukraine, Prime Minister Putin has achieved his objective so EU supply disruptions from that location are unlikely. In addition Russia has damaged its reputation following previous disputes and appears reluctant to damage it further. And the EU has improved its responsiveness to such disruptions.

    Given the significant hard currency revenues generated by the EU it is difficult to see it run short of gas supplies in the medium to longer term.

    Therefore, it is difficult to justify curtailing the penetration of gas in either the power or non-power sectors on security of supply criteria alone. In the longer term, yes, it makes sense to go down the decarbonisation route, but, in the short to medium term, any curtailment or reduction of gas penetration will have to rely on, what Richard calls, “green fluff”.

  12. Abiotic oil and geothermal enrgy seem to offer hope for energydevelopment, even in Ireland.

    Earthquakes, small, may be a by-product. Let us not follow the Swiss in rejecting deep drilling?

  13. @Veronica.
    You asked Richard a question, which I can perhaps answer..

    Your question was “Can you point me to any large scale energy systems project that doesn’t require government subsidy?”

    An immediate answer is “oil and gas fields”. They’re often huge, and usually pay significant taxes, let alone receiving large subsidies. Another answer is “LNG infrastructure”. Same answer applies, with investments measured in billions in both cases.

    Another is – in the USA and (i think) in the UK – “private power generation capacity”. There are multiple privately owned power plants.

    It’s a widespread fallacy that private investment doesn’t undertake investment in infrastructure. All the first railroads in the world were built with private money, so were the first phone systems, oil pipeline networks, etc.

  14. @ Teresa

    Like all majo baseload, France runs excess capacity over the wee hours.

    Little Ireland would need but a scrap of the electricity that French nuclear stations need to bleed off while most of the population snoozes with the lights out.

  15. Aidan,

    arbitrage is indeed the best economic use for pumped storage. Hence Ireland could piggyback of a larger country with high baseload generation capacity, like France.

  16. We need Nuclear power generation in Ireland.

    Five plants at approx. E5billion each and we are sorted for the next sixty years.

    Nuclear is cost effective comparable to any other proposal. Pluses include; massively reduced oil purchases; lowest carbon output of any technology:cheap electricity.

  17. @) Richard

    Can you provide any empirical evidence from history where the energy needs of a country where met in the absence of a public subsidy?

    If society depended upon market forces alone to provide for its energy needs we would still be living in the stone ages.

  18. @Edgar,

    Yes, the first electricity networks may have been private but they weren’t intended to supply electric power at reasonable cost to large populations, were they?

    I’m inclined to agree with Stringer Bell’s point.

  19. I’m a little concerned that pumping all this salty seawater up onto the hillside will spoil the water table (and hence water supplies) for the locals.

  20. Lookie thar! Can it be the invisible hand hovering over the nuclear lobby?

    Of course nuclear power is heavily subsidised, it always has been and always will be. In the current UK program which Mr. Tol may know something about the public is subsidising it in the following (mostly hidden) ways:

    1. Insurance and limitations on liabilities in case of a major accident
    2. Underwriting the commercial risks
    3. The cost of providing anti-terrorist protection
    4. The short and medium term costs of disposing of nuclear waste
    5. The long term costs of storing waste
    6. The de-commissioning of nuclear plant (Britains current nuclear legacy will cost in excess of €100 bn to clean up.)
    7. Numerous nuclear research establishment paid for by the UK government
    8. OECD export credits for nuclear power

    etc. etc. etc.

  21. @ Paul Hunt

    You raise a good point, the invisible hand points squarely in the direction of CCGTs. Not good for security of supply mind, some of the major gas units had major trouble running reliably during the cold snap.

  22. There are many things we still don’t know about nuclear energy:

    1) How much a kWh of nuclear energy actually costs if you include the cradle to grave costs from mining uranium / thorium through construction and maintenance to decommissioning and safe long-term storage of waste. Nuclear lobby figures are based on the usual corporate externalisation of cost and risk into the public sphere.
    2) What the cradle to grave EROEI is. That’s the ratio of energy you get out over the energy put in over the whole process detailed in 1). Current best estimates has non-fast breeder fission coming in with a lower EROEI than hydro, wind or coal. But estimates vary hugely.
    3) How much fissile material there is to be mined or extracted from seawater at a reasonable financial and energy cost. Again estimates vary widely.

    Fast breeder reactors would be another kettle of fish with a much better EROEI if we had a standard design known to work over the long term.

  23. @Veronica/Edgar/Stringer/Paul
    The electricity grid is a national monopoly. There are substantial economies of scale in power generation, so supply is a natural oligopoly. There are externalities, both negative (emissions) and positive (light in darkness). You simply cannot run an electricity system without regulation, and probably not without subsidies either.

    That’s not the point.

    There are many technical solutions to volatility of supply and demand. Pumped hydro is only one. The power system should (cross-)subsidise the provision of adequate reserves in a technology-neutral way. The government should not pick a winner and subsidise a particular type of reserve.

  24. @Veronica – what actually happened is that paralel networks, and lots of ‘micro generation’ emerged. In the UK there were literally 100s of suppliers/networks – of course all highly inefficient. Given the natural monopoly, particularly on the network (putting in a number of paralel networks is obviously daft), it is no wonder that the state intervened.

    @Richard – I only threw that snippet of information in for completeness – I should have added the bit above at the time, which would have made it clear that I concur with you, that the state should not pick winners but should let them emerge.

    Subsidies, in so far as they are targetted at particular technologies, will distort the market in a way, which might lead to a less efficient technology winning (this depends on the size of the subsidies and the relative efficiencies), which ultimately results in higher prices.

  25. @Richard,

    “That’s not the point.”

    I beg to differ. Evaluating the economics of the provision of electricity system reserves (presuming that’s what we’re about here) is unlikely to lead to a sensible result when the economics of the electricity system are undermined by systematic policy and regulatory dysfunction.

    You acknowledge the economies of scale in generation that lead to oligopoly in supply, but there are also significant economies of scope that reinforce this oligopoly. A generating business employing a mix of technologies and that internalises decisions on the plant configuration to match the load profile (thereby reducing transaction costs) can produce electricity more efficiently than a business relying on a single technology which has to supplement its supply from other sources. Even if a market mechanism is in place to absorb the supply from a single technology generator, additional costs are incurred to ensure this supply may be incorporated to match the required total load profile.

    Moving from the virtual monopoly in generation that the ESB previously enjoyed to a competitive (and efficient) market in generation requires the emergence or entry of a number of generating businesses that have the size and range of technologies to capture some of these economies of scope and scale. Competition between them should increase the amount of the consumer surplus captured by consumers – rather than having the previous monopolist attempting to capture the entire surplus.

    Two other factors facilitate this beneficial outcome. First, a generating business employing a range of technologies will have plants of different vintages. The profile of quasi-rents that the business is both entitled and required to recover is, in general, below the LRMC of new plant. Paying all generators the LRMC for capacity availability will confer additional rents on established businesses with a variety of plant vintages and imposes additional costs on consumers. Genuine competition between these businesses should not require this capacity payment. They would have an incentive to retain part of any rent captured in excess of the quasi-rents to partly subsidise investment in new generation. This is part of the normal cross-subsidisation that goes on in most large businesses, but it seems to escape the attention of, or to annoy, most economists.

    The second factor is a bankable guarantee of full investment recovery. This is required because these assets are specific and have long lives. Previously, monopoly, vertically integrated supply businesses, such as the ESB was, were able to rely on a continuing stream of revenue from their captive customers. The introduction of full retail competition has broken this chain. Generation and supply businesses are no longer able to lock-in the revenue from a franchise of captive consumers. The focus is on the short-term retention and capture of market share; the wholesale market, by definition, has a short-term focus. And these do not provide the basis for the long term commitments that generators (and indeed investors in networks) require. The British regulator, Ofgem, has finally woken up to this fact and there are signs that the penny is beginning to drop throughout the EU.

    The move to a mix of competition and regulation in Ireland has the downsides of all these factors – and more – in spades. And consumers are paying through the nose. The market is too small to facilitate the emergence of appropriately sized and scoped generating businesses. Guaranteed, regulator-determined capacity payments are passing rents to the established generating businesses. These payments are seeking to proxy for the previous long-term revenue streams from captive customers and are excessive. And the entire transition to this optical illusion of consumer-benefitting competition and regulation has been managed, at consumers’ expense, to minimise commercial and financial damage to the ESB.

    In this context it is difficult to see how any sensible evaluation of system reserve options may be conducted.

  26. re. Energy Subsidies
    The European Environmental Agency published a report on subsidies in the EU-15 in 2004

    Others may be familiar with more up to date studies on the topic.


    “Five plants at approx. E5billion each and we are sorted for the next sixty years. ”

    As far as I know, EPR (the only one likely to be considered for Ireland?) comes in a standard size of 1,600MW. So five of these would mean greater generation capacity than is currently installed on this island – thereby crowding out all other forms of generation, given the “must-run” nature of nuclear power generation and also the way in which transmission would be built/operated to cater such plants.

    “cheap electricity” – back to the 1950s thinking when nuclear powr was going to be “too cheap to meter”.
    Apparently the same was said of the Shannon Scheme which led to the setting of the ESB. There was a debate on whether to install meters in domestic residences.

    Is the electricity business unique in attracting that kind of “snake-oil” sales thinking?

    IMO, electricity is going to be more expensive in Western Europe in future for a combination of reasons
    1) more investment is needed in all parts of the generation-transmission-distribution supply chains and the management of these chains. Two examples – CCS for coal-fired stations is going to make coal fired generation more expensive, as is the installation of smart meters at the other end of the line
    2) Security of supply – gas supplies may be abundant now. But will that last over the lifetime of the assets that have to be put in place now – partially to replace older plant, including nuclear plant in UK, France, etc?
    3) New uses for electricity eg in personal transport
    4) Climate change presssures (To what extent is this winter’s weather due to a change in the North Atlantic/Arctic Oscillations? If so, is this more likely to happen again and with greater frequency – as happens when systems become unbalanced?

    unless there is some scientific/technical/engineering breakthrough as with the invention of the IC and microprocessor.

  27. @pope

    Your list is just old bad paranoid propaganda. It does not address the question. This country requires secure, cheap and stable electricty. Any plans we may have for “the smart economy” or an agri-centric economy or any other configuration all require that this question is resolved properly.

    Someone please tell me what alternative there is to nuclear? Realistically? Please remember that any solution based on an inter-connector with Europe/Britain does not provide any of the above. The energy costs will be higher. There is massively reduced security of supply and there is no upside revenue possible. Also please note that we need this secure cheap electricity soon not in fifty years (which is how long it will take for alternatives to mature enough to be viable.

    Nuclear is perfect for Ireland, Especially now with the advances in scale and performance by the industry gained over sixty years.

    @Richard Tol

    It will be the State through the ESB that procures and operates any new plants. My ideal would be a smaller State than we have now, but one still has its uses and backstopping a large infrastructure outlay is one of these.

    Where are these new technologies? As we wait for their emergence the Govt wants to run off and plug into the British grid.

  28. @Richard Tol.
    You said “The electricity grid is a national monopoly. There are substantial economies of scale in power generation, so supply is a natural oligopoly. “.

    The history of terms like AT&T and natural monopoly make interesting reading. In any case, one MIGHT argue that the grid is a natural monopoly, but the same argument is a huge stretch when talking about generation.

  29. @Stringer Bell and Veronica
    AFAIK there were several early – privately owned – electricity companies supplying city sized populations.

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