A new report from the National Hydropower Association (NHA) argues that pumped storage hydropower (PSH) could play a critical role in meeting the rapid growth in electricity demand driven by artificial intelligence and data centres in the US.
The report, Winning the AI Race: Tapping into Pumped Storage Hydropower, identifies more than 60GW of proposed pumped storage capacity in the US development pipeline. Around 85% of these projects are located in the western US, where electricity demand is expected to grow rapidly due to data centres, electrification and advanced manufacturing.
According to the NHA, about 80 pumped storage projects are currently awaiting licensing at the Federal Energy Regulatory Commission (FERC). Despite several projects being fully permitted and construction-ready, none have begun construction, largely due to financing challenges and regulatory complexity.
The report states that the growth of AI and associated data centre infrastructure is placing new demands on grid reliability. Data centres require continuous power supply and are sensitive to voltage instability or frequency deviations. At the same time, many regions of the US grid are retiring conventional generating capacity that historically provided system inertia and other reliability services.
Pumped storage hydropower currently represents nearly 90% of the country’s long-duration energy storage. Modern facilities can provide more than eight hours of storage and can operate for 80–100 years, significantly longer than most battery technologies.
The NHA argues that PSH could help address both reliability and transmission challenges. When located near load centres, pumped storage can act as dispatchable generation that reduces reliance on constrained transmission imports. When located near renewable generation, it can absorb surplus power that might otherwise be curtailed.
However, the report says policy reforms are needed to accelerate deployment. The association calls for modernisation of hydropower licensing under the Federal Power Act, expanded tax incentives for upgrades to existing hydropower facilities, and reforms to wholesale electricity market rules to better compensate long-duration energy storage resources.
It also recommends that the US Department of Energy use its loan guarantee authority and grid resilience programmes to reduce construction and financing risks for new pumped storage projects.
According to the NHA, unlocking the proposed pumped storage pipeline could provide the long-duration storage and reliability services needed to support continued expansion of data centres while maintaining grid stability and controlling consumer electricity costs.
