Pumped Storage Hydroelectric Plant

Practical Law Glossary Item 5-521-7983 (Approx. 4 pages)

Glossary

Pumped Storage Hydroelectric Plant

Also referred to as pumped hydro storage, a type of energy storage technology in which plants generate electricity during peak loads by using water that was previously pumped into a storage reservoir during off-peak periods when excess generating capacity is available. When additional electricity is needed to meet excess demand or to compensate for reduced generation from other sources (such as wind or solar), the water is released from the reservoir and used to move turbines connected to generators. Pumped storage hydro accounts for most of the large-scale energy storage power capacity in the US.

The Inflation Reduction Act (IRA) (P.L. 117-169, 136 Stat. 1818 (2022)) expanded and created new tax credits for which pumped storage hydro projects can qualify if they meet the eligibility requirements. The IRA:

Expanded the investment tax credit (I.R.C. § 48) to apply to standalone energy storage projects with a nameplate capacity greater than 5 kilowatt hours (kWh). Before the enactment of the IRA, this credit was only available to storage projects installed in connection with a solar energy project and which were charged at least 80% by that facility. The IRA added a new section that allows eligible energy storage projects (broadly defined as any property which receives, stores, and delivers energy for conversion to electricity (or, in the case of hydrogen, which stores energy)), to qualify for the ITC if they begin construction before January, 1, 2025 (I.R.C. § 48(a)(3(A)(ix)). After this date, qualifying projects are eligible for the technology neutral ITC discussed below.
Added the clean ITC (I.R.C. § 48E), a technology-neutral ITC available for qualifying projects with net zero emissions (including energy storage projects) that start construction after December 31, 2024. The energy storage ITC applies to new energy storage projects or capacity upgrades at existing energy storage projects with a capacity greater than 5 kWh.

The base credits available for pumped hydro projects may be increased significantly if the project qualifies for any of the following:

The prevailing wage and apprenticeship bonus.
The domestic content bonus.
The energy communities bonus.

For more information on hydroelectricity and pumped hydro storage, see Practice Notes, Renewable Energy: Overview (US): Hydropower and Renewable Energy Project Development Issues: Siting Considerations for Co-Located Energy Storage: Pumped Storage Hydroelectricity.

For more information on the tax credits, see:

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