In this paper, three practical operation strategies (24Optimal, 24Prognostic, and 24Hsitrocial) are compared to the optimum profit feasible for a PHES facility with a 360 MW pump, 300 MW turbine, and a 2 GWh storage utilising price arbitrage on 13 electricity spot markets. The results indicate that almost all (∼97%) of the profits can be obtained by a PHES facility when it is optimised using the 24Optimal strategy developed, which optimises the energy storage based on the day-ahead electricity prices. However, to maximise profits with the 24Optimal strategy, the day-ahead electricity prices must be the actual prices which the PHES facility is charged or the PHES operator must have very accurate price predictions. Otherwise, the predicted profit could be significantly reduced and even become a loss. Finally, using the 24Optimal strategy, the PHES profit can surpass the annual investment repayments required. However, over the 5-year period investigated (2005–2009) the annual profit from the PHES facility varied by more than 50% on five out of six electricity markets considered. Considering the 40-year lifetime of PHES, even with low investment costs, a low interest rate, and a suitable electricity market, PHES is a risky investment without a more predictable profit.
Many studies have analysed and compared a wide range of energy storage alternatives for future energy systems based on electricity (Connolly and Leahy, 2010, Ekman and Jensen, 2010, Gonzalez et al., 2004, Ibrahim et al., 2008, Kaldellis et al., 2009 and Kondoh et al., 2000), heat (Connolly and Leahy, 2010, Lund and Clark, 2002 and Mathiesen and Lund, 2009), and even transport (Kempton and Tomic, 2005 and Lund and Kempton, 2008). Among other things, these studies indicate that pumped hydroelectric energy storage (PHES) is the most utilised and mature large-scale energy storage technology currently available for electricity (Connolly and Leahy, 2010, Ekman and Jensen, 2010, Gonzalez et al., 2004 and Ibrahim et al., 2008), but its major drawback is the lack of suitable sites (Ekman and Jensen, 2010, Ibrahim et al., 2008, Kaldellis et al., 2009 and Kondoh et al., 2000). However, recent reports show that there is over 7 GW of new PHES plants planned in the EU alone (Deane et al., 2010), there are more suitable PHES sites available than conventionally assumed (Connolly and MacLaughlin, 2010, Connolly et al., 2010, Spirit of Ireland, 2009 and Yang and Jackson, 2011), and PHES can enable higher wind penetrations at lower costs onto some conventional power systems (Benitez et al., 2008, Kapsali and Kaldellis, 2010 and Perez-Diaz et al., 2010). Hence, PHES will have a large role in future electricity grids. Therefore, this study investigates if it is possible to profit from a PHES facility on existing electricity markets.
The results indicate that the 24Optimal operation strategy is the most profitable practical method of dispatching a typical PHES facility. Under this strategy the PHES is optimised based on the day-ahead electricity prices and by doing so, almost all (∼97%) of the profits feasible can be obtained when the charge and discharge cycles are each approximately 6 h, which is typical for an existing PHES plant. This indicates that long-term foresight of electricity prices is not essential for most PHES facilities to maximise their profits using electricity price arbitrage. However, a further analysis based on the Irish electricity market indicated that for the 24Optimal strategy to be effective, the day-ahead electricity prices must be the actual prices which the PHES facility is charged or the PHES operator must have very accurate price predictions
