Pump Storage Hydropower for delivering Balancing Power and Ancillary Services - A Case Study of Illvatn Pump Storage Power Plant

The power markets in Europe are changing rapidly. The drastic shift towards renewable energy and interconnection between power markets has brought with it challenges related to power balance and grid stability. Consumption and generation of electric power needs to be at balance at all times and a secure and reliable power system requires sensitivity to multiple time scales. Increased demand for balancing energy and ancillary services has the potential of making pump storage projects in Norway more profitable. Hydro Energy is evaluating the potential of building a pump storage power plant in the existing Fortun power system in western Norway. This study aims to quantify the income potential when co-optimizing operation in the wholesale electricity market and balancing markets with three different technical design alternatives offering different degree of operation flexibility. Alternative 1 is based on the license application for the project. The fixed speed pump is a reversible Francis turbine with an installed capacity of 39MW in pumping mode and 48MW in turbine mode. The second alternative, Alternative 2, is similar to Alternative 1 only it is equipped with a variable speed pump. Alternative 3 has increased production and pumping capacity as well as a variable speed pump. Investment cost of the three alternatives range from 610mill NOK to 700 mill NOK. The markets considered are FCR day option, the RK market and the spot market. A price scenario for the spot market, FCR market and the RK market are developed. The price scenario is based on assumptions for future demand of balancing power. Power plant operation strategy is chosen based on the hydrological data and a seasonal pumping cycle is considered the best alternative. Income is estimated in respect to historical prices and scenario prices. The ongoing changes in the power market would potentially be a game changer for profitability of pump storage hydropower in Norway and should be considered for investment decisions. The investment analysis of the three technical alternatives shows that ability to participate in balancing markets has the potential to increase potential income significantly. Only Alternative 2 and 3 are considered economic feasible given that 80-100% of the income potential is obtained. Profitability of the projects increase when income estimation is done based on scenario prices. Based on the assumptions and method of this study Alternative 2 is considered the best alternative for Illvatn pump storage project based on investment analysis.