Energy transition

Pumped hydro

The original grid-scale battery, water pumped uphill when power is cheap, released back down through turbines when it is scarce. Huge power and many hours of duration in a civil asset that runs for 50–100 years. Not a merchant bet but a long-duration, long-life storage business: a per-MW revenue stack of arbitrage, capacity and system services, strongly contracted. Pick a real scheme below and follow it through the engineering, the model and a working returns model.

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In focus · —
Example

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Drag the sliders to see what earns the money, the power of the scheme, the revenue captured per MW, and how fully that revenue stack is captured, while the water cycles up and down the penstock.

1000 MW
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Power
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Energy (duration)
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Storage revenue
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recurring revenue p.a.
EBITDA p.a.
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What it is & how it works

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How it earns

Model A · long-duration storage

A per-MW revenue stack, strongly contracted

Pumped hydro is the long-duration, long-life storage asset, an upper reservoir, a lower reservoir, tunnels and a powerhouse that pump water uphill when power is cheap and release it through turbines when power is scarce. It stores huge power and many hours of duration in a civil asset that runs for 50–100 years. The revenue is the same stack as a battery, energy arbitrage, a capacity payment and system services, expressed as an annual revenue per MW: the power × the revenue per MW × how fully the stack is captured. But because the asset lasts generations and the civil capex is very high (~£1.5–3m/MW), pumped hydro is typically far more contracted, a cap-and-floor regime, a capacity payment or a regulated tariff, which removes most of the merchant downside. Against a very light O&M cost base, the margin is high; the return is lower and steadier than a merchant battery, over a very long hold.

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What it costs, and how it's financed

Revenue → operating costs → EBITDAMargin —

The capital · dam + tunnels + powerhouse
Financingallocation

    History & framework · key milestones
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      Cash flows & returns

      Build & support

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      Revenue regime & tax

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      Financing & hold

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      Unlevered IRR
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      asset / project return
      Levered IRR
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      return to equity
      Equity multiple
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      MOIC over hold
      Payback
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      project, undiscounted
      Cash-flow profile, equity■ invested   ■ returned
      Show the year-by-year schedule
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      What drives the return

        See also the Pumped hydro simulator, a live charge / discharge model of a scheme, and the Cash-flow & DCF model.