Chapter 10 Closed-Loop Pumped Storage and Small-Scale Hydropower Power Projects: Developing Opportunities for Meeting Climate Change Commitment Goals With Minimal Impacts to Environmental Resources

• Jurisdiction: United States

Chapter 10 Closed-Loop Pumped Storage and Small-Scale Hydropower Power Projects: Developing Opportunities for Meeting Climate Change Commitment Goals With Minimal Impacts to Environmental Resources

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Jenna R. Mandell-Rice Van Ness Feldman LLP Seattle, WA
Erik Steimle Rye Development Portland, OR
Tiffanie A. Ellis Van Ness Feldman LLP Seattle, WA

JENNA R. MANDELL-RICE is a Partner with Van Ness Feldman LLP in Seattle, Washington. Jenna practices in the areas of natural resources, environmental, and water law. She helps clients navigate complex regulatory, permitting, enforcement and litigation matters under a range of environmental statutes, including the Federal Power Act, the Washington State Environmental Policy Act (SEPA), National Environmental Policy Act (NEPA), Endangered Species Act (ESA), Clean Water Act (CWA), and Safe Drinking Water Act (SDWA). Jenna advises municipal water utilities and suppliers to address water rights, water supply and water quality challenges. Prior to joining the firm, Jenna was an associate in K&L Gates' Washington DC office. During law school, she served as a law clerk for the Council on Environmental Quality (CEQ), an office within the Executive Office of the President that coordinates Federal environmental efforts and works closely with agencies and other White House offices to develop environmental policies. While at CEQ, she worked on a variety of policy matters under the National Environmental Policy Act, the Clean Air Act and the Endangered Species Act. Jenna was an intern for the Honorable Christine M. Arguello in the U.S. District Court for the District of Colorado and served as the Senior Articles Editor of the George Washington University Energy and Environmental Law Journal. Jenna is the Co-Coordinator of Van Ness Feldman's Land, Water & Natural Resources practice.

ERIK STEIMLE, Executive Vice President, Rye Development, Portland, OR

I. Introduction

Hydropower historically has served as an important energy source in the United States and in the Pacific Northwest in particular. It has the benefit of being not only a renewable source of energy, but one that is neither weather nor time-of-day dependent. With the increased demand for renewable energy today, hydropower will continue to play a critical role in balancing other renewable energy resources. However, hydropower is controversial due to its potential to impact other water-dependent resources.

Today, the increased demand for hydropower is colliding with significant constraints on water resources, particularly in the Western United States. For example, twenty-three year drought conditions on the Colorado River highlighted the intense competition for limited water resources: drought conditions called for cuts to water supply for agricultural and municipal users alike, detrimentally impacted aquatic species, and raised concerns that Lake Powell's lake levels would fall below the level at which Glen Canyon Dam can generate hydropower.

Competing demands for water resources calls for evaluating options for harnessing waterpower as a renewable energy resource, while minimizing impacts to water-dependent resources, including domestic and agricultural water supply, and fish. This article highlights two variations on hydropower that provide energy benefits while minimizing environmental impacts and the regulatory regimes that govern the use of the water in the Western United States.

II. The Contribution of Hydropower to Renewable Energy Resources

There is unprecedented demand for renewable energy resources in the United States today, and the transition to renewable energy must be fast. In 2021, the Biden Administration issued Executive Order ("EO") 14,057, which requires "100 percent carbon pollution-free electricity on a net annual basis by 2030."¹ The Biden Administration has also adopted a national strategy to achieve net-zero carbon emissions in every sector of the economy by 2050.²

Many states have enacted legislation to decrease dependence on fossil fuels and increase grid reliance and reliability through renewable energy resources and battery technology. For example, Washington state enacted the Clean Energy Transformation Act ("CETA") in 2019. CETA sets numerous milestones requiring the deployment of new renewable resources. By

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December 31, 2025, utilities must phase out coal-fired electricity.³ By January 1, 2030, utilities must have portfolios that are greenhouse gas emissions neutral.⁴ And by January 1, 2045, utilities must supply 100% renewable or non-emitting electricity to their customers with no provision for offsets.⁵

Similarly, California's renewable energy targets require 100% renewable energy and zero-carbon electricity by the end of 2045.⁶ In addition, in 2022, California set intermediate targets of 90% renewable energy and zero-carbon electricity by 2035, and 95% by the end of 2040.⁷ Based on these targets, California utilities must triple decarbonization rates to meet 2030 requirements.⁸

Other states with renewable energy targets include, for example, Oregon, which requires 100% "below baseline emissions" levels by 2040.⁹ Nevada has also set a goal to achieve a 50% increase in renewable energy by 2030¹⁰ and "an amount of energy production from zero carbon dioxide emission resources that equals the forecasted demand for electricity by customers of the utility" by 2050.¹¹ In short, high demand for renewable energy resources exists at both the federal and state level. However, the development of renewable energy faces significant regulatory hurdles at all levels of government, which in turn threatens to delay the timely development of these resources.

Meeting federal and state carbon emission reduction goals will require more than development of solar and wind projects. Solar and wind energy, in particular, are limited in their ability to provide consistent energy during peak energy consumption times, which exacerbates grid reliability issues faced across the county.¹² Hydropower serves as one potential solution for these issues. Significantly, hydropower also plays an often-overlooked role in enhancing grid reliability. For example, although hydropower provides only 6 percent of overall United States electricity generation, it provides approximately 40 percent of the nation's "black start" capability, which is vital in enabling the grid to restart (in cases such as the 2003 Northeast blackout).

The 2016 Department of Energy Hydropower Vision Report ("Vision Report") outlines the potential for adding energy generation to non-powered dams. The Vision Report shows that by 2050, 4.8 gigawatts ("GW") of new energy generation could be added to existing infrastructure

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within the United States with the potential for 6.3 GW of added generation at existing hydropower plants based on facility upgrades.¹³ Further, the Vision Report shows the potential for 35.5 GW of new pumped storage in the United States by 2050.¹⁴ Current pending permit applications for pumped storage hydropower projects range in capacity from 49 megawatts ("MW") in New York to 3,600 MW in Arizona.¹⁵ Arizona has the highest number of pending permits with eight projects in the permitting stage.¹⁶

Traditional hydropower faces significant challenges both in the form of intense regulatory burdens as well as opposition. Demands for removal of dams have increased in recent years. For example, decades of controversy have surrounded four dams operated by the United States Army Corps of Engineers on the lower Snake River in Washington. Although the lower Snake River dams provide benefits in the form of navigation, hydropower, and recreational opportunities, the impacts of these four dams on threatened and endangered fish species has led to significant questions about how to manage the dams—including whether the dams should be removed entirely.¹⁷

Closed-loop pumped storage hydropower and small-scale hydropower projects help address these issues: they provide opportunities for utilities to use renewable energy storage to supplement peak energy needs and address issues related to grid reliability and pricing, while also limiting impacts on natural resources and creating opportunities for greater deployment of other renewable energy resources.¹⁸ Moreover, the resource potential for new pumped storage hydropower development in the United States is significant.¹⁹

III. Closed-Loop Pumped Storage Hydropower

Pumped storage hydropower is a type of hydroelectric energy storage considered a large-scale energy storage resource. Pumped storage hydropower projects function as batteries that may be employed in emergencies or in instances of excess energy consumption or decreased energy production. Pumped storage hydropower provides reliability benefits during the peak net load hours when solar output is diminishing and additional load is returning to the grid.²⁰ These projects act as a storage resource that absorbs the output of solar and wind projects during periods of oversupply.²¹ Pumped storage hydropower projects are capable of energy storage on a scale exceeding typical batteries and other energy storage resources.²² Accordingly, it is unsurprising

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that pumped storage hydropower is currently the most employed energy storage technology.²³

There are several variations of pumped storage hydropower. They all generally involve releasing water from an upper reservoir to a lower body of water at different elevations. Open-loop pumped storage hydropower projects are continuously connected to naturally flowing water features.²⁴ Open-loop pumped-storage hydropower projects may be a part of another larger hydropower project, or they may involve discharge into the ocean.²⁵ Another type of open-loop pumped-storage hydropower leverages existing water and water infrastructure by utilizing wastewater.²⁶

Another variation are closed-loop pumped storage projects, which are not connected to a naturally flowing water feature on a...