Capital costs in pumped hydro storage (PHS) systems are significantly higher than their operational costs. Specifically:
- Capital Costs: According to reported data, power capital costs for PHS range roughly between USD 1,000 to USD 4,000 per kW, with energy capital costs varying from about USD 5 to USD 100 per kWh capacity (all in 2021 USD). These high upfront costs reflect investments in reservoirs, turbines, pumps, and associated infrastructure needed for large-scale storage.
- Operational Costs: Operational and maintenance (O&M) costs for pumped hydro are relatively low compared to capital expenses. These costs primarily cover routine maintenance, staffing, and minor repairs, as pumped hydro facilities tend to have long lifetimes (often 50 years or more) and high reliability.
- Cost Comparison: The capital investment dominates the total expenditure on pumped hydro storage. The operational costs form only a small fraction of the total lifetime cost. This contrasts with technologies like batteries, which may have lower capital costs but higher operational costs due to degradation and replacement needs.
- Economic Implication: The high capital cost is amortized over decades due to PHS’s long lifespan, often between 50 to 100 years. Consequently, annualized capital costs are manageable when spread over the system’s long life, making pumped hydro economically attractive for long-duration energy storage despite the substantial initial investment.
In summary, pumped hydro storage requires a large upfront capital investment but benefits from low operational costs and long service life. Operational costs are much lower in comparison to capital costs, making the capital cost the main factor affecting the economics of PHS projects. This cost dynamic supports PHS as a viable solution for large-scale, long-duration energy storage.
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