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Data center operators eyeing pumped hydro storage

Animated illustration of a glowing data center with four bolts of lightning feeding electricity into it.

Illustration: Brendan Lynch/Axios

Companies building power hungry data centers are looking at pumped hydro projects for storage.

Why it matters: AI is fueling demand for the facilities, which require massive amounts of electricity to run.

How it works: Pumped hydro storage projects are commonly designed with two water reservoirs at different elevations, storing energy via gravity. As the water flows from the upper to lower pool, it generates power.

  • The U.S. has 43 of these projects running today but no new projects under construction.

Driving the news: Last week, hydropower developer Rye Development was awarded an $81 million grant from the Department of Energy to help build a $1.3 billion, 287 MW pumped storage hydropower facility on a former coal mine in Kentucky.

  • The project is the first of its kind in more than 30 years.
  • "We're starting to see group interest from some of the folks in the data center space," says Rye Development CEO Paul Jacob. Jacob noted that the predominant off-takers today are still largely utilities.
  • The Biden administration, through the Inflation Reduction Act and the Bipartisan Infrastructure Law, is helping to incentivize pumped hydro storage projects.

Zoom in: Many of the biggest data center operators that are run by U.S. consumer companies want clean energy for their facilities.

  • But since wind and solar are intermittent, storage projects provide backup power when the sun and wind aren't generating energy.

The big picture: The pumped hydro under pursuit reveals the lack of better commercial options for large, long-duration storage.

  • In fact, most new utility-scale storage projects are being built using lithium-ion batteries. Other technologies include new battery chemistries from Form Energy and new designs from Energy Vault and Energy Dome.

What's next: We'll be watching to see if data center operators become off-takers for pumped hydro storage projects, and in particular the Kentucky coal mine project.

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