While there is an obvious race going on among developers to train their artificial intelligence models and build more computing chips and capital, the biggest obstacle to all of them is the ability to provide continuous amounts of reliable electricity. While data centers continue to drive electrical demand upward faster than anticipated, those planning the power grids now find themselves asking if they will be able to meet the demands placed upon them.
An unexpected demand increase and the adoption of AI
There are many areas throughout the United States where data centers are proliferating due to the rapid adoption of artificial intelligence in various industries. Data centers need constant levels of reliable electric service; i.e., they do not shut down in times of high stress on the power grid, nor do they shut down during weather-related outages. In some parts of the country, specifically in the western part of the country, utility companies are indicating that they are experiencing difficulty keeping pace with the increasing demand for electric services.
Hydroelectricity’s role in this area has been well-documented
The National Hydropower Association recently released a study stating that Pumped Storage Hydroelectric Power has been quietly one of the best ways to balance supply and demand in terms of large volumes of energy. Historically, pump hydro has been considered legacy infrastructure; however, with the rise of artificial intelligence, the industry is beginning to see pumped hydroelectric power as a viable means of meeting future electrical needs.
Unlike traditional generating units, which produce electricity continuously, pump hydro stores water at high elevations during off-peak hours. When the grid requires additional firming up (as opposed to volume), the stored water is rapidly returned to its lower elevation reservoirs, creating instant firming up of the grid.
The numbers associated with pumped storage hydroelectric power are impressive
The study completed by the National Hydropower Association states that over 60,000 MW of proposed pumped storage hydroelectric power is currently making its way through the federal regulatory process, with approximately 85% located within the western United States. This represents the same level of capacity as many countries’ total electrical output.
Pumped storage is also responsible for almost 90% of the US’s installed base of long-duration energy storage. Pumped storage hydroelectric power provides long-duration storage of electrical energy for extended periods. During peak demand periods, it releases stored energy back into the grid, allowing for rapid response to changing load conditions. The ability of pumped storage to release stored energy quickly is significant to AI-related data centers.
However, although there exist numerous opportunities for the construction of new pumped hydroelectric facilities throughout the US, very little construction has begun. A wide chasm exists between the technically demonstrated potential of pumped hydroelectric power and its practical implementation.
Why is development slow in this sector?
According to the report, technical barriers to implementing new pumped hydroelectric facilities no longer exist. Instead, policy issues and market structure issues are hindering progress. Long time frames required for obtaining licenses, uncertain signals for market value provided for long-duration storage, and financial risk that discourages investors from investing in long-duration energy storage are cited as primary reasons for the lack of development.
Leadership within NHA believes that pumped hydroelectric power is ready for use but underutilized. If markets are structured to provide rewards for reliability, rapid response, and duration-based performance characteristics, then the grid would likely rely less on short-duration-based solutions that are inappropriate to support AI-based peak load requirements. The federal action items listed in the report include hydropower licensing reforms and changes to wholesale market rules, and were characterized by NHA leaders as corrective measures to make possible the utilization of excess capacity previously identified.
The message contained in the report is subtle yet significant: there is no physical shortage of resources available to meet increased demand caused by AI. As AI continues to reshape how we consume electricity, pumped hydroelectric power is emerging again as a solution, providing a balanced system-wide solution as opposed to being seen as an alternative technology.
