When pumped storage is economically feasible

A pumped storage plant is a hydro plant with an upper and a lower reservoir. In off-peak hours it uses surplus grid power to pump water up; in peak hours the water flows back through the turbine to generate power. The same reversible pump-turbine and motor-generator usually do both jobs.

 Upper reservoir
     |  penstock
     v ^
 [pump-turbine]--[motor-generator]--grid
     | ^
 Lower reservoir

Cycle efficiency is about 70–80 %, so it is a net consumer of energy. It is economically feasible when:

1. Large price difference between peak and off-peak energy. The value of peak energy must exceed the cost of pumping energy divided by the cycle efficiency: $C_{peak} > C_{off\text{-}peak}/\eta_{cycle}$.
2. Cheap surplus energy is available in off-peak hours from base-load plants (thermal, nuclear, run-of-river hydro) or from solar and wind that would otherwise be spilled.
3. Base-load plants must run steadily, e.g. a system with many steam plants, where peak-following causes poor efficiency and wear.
4. Good site: two reservoirs close together with a high head (short penstock per metre of head), water available, firm foundation and low sediment.
5. Need for fast reserve and regulation: grids that need spinning reserve, frequency control and black-start capability value the plant beyond its energy.
6. Peak load lasts only a few hours, so a modest storage volume is enough.
7. Existing reservoirs can be used (lower cost civil works).