A new report from the National Hydroelectric Association (NHA) argues that pumped storage hydropower (PSH) could play a key role in meeting the rapidly increasing demand for electricity driven by artificial intelligence and data centers in the United States.
The report is Win the AI race: Leverage pumped storage powerhas identified more than 60 GW of proposed pumped storage capacity in the U.S. development pipeline. Approximately 85% of these projects are located in the western United States, where power demand is expected to increase rapidly due to data centers, electrification, and advanced manufacturing.
According to the NHA, approximately 80 pumped storage projects are currently awaiting approval from the Federal Energy Regulatory Commission (FERC). Despite several projects being fully permitted and ready for construction, none have begun construction, largely due to financing issues and regulatory complexities.
The report states that the growth of AI and its associated data center infrastructure is creating new demands on grid reliability. Data centers require a continuous power supply and are sensitive to voltage instability and frequency deviations. At the same time, many regions of the U.S. power grid are retiring traditional generation capacity that traditionally provided system inertia and other reliability services.
Pumped storage hydropower currently accounts for almost 90% of the country’s long-term energy storage. In modern facilities, they can be stored for more than 8 hours and can run for 80 to 100 years, which is significantly longer than most battery technologies.
NHA claims that PSH can help address both reliability and transmission challenges. When located close to load centres, pumped storage acts as dispatchable generation reducing dependence on constrained transmission imports. When installed near renewable power generation, they can absorb excess power that could otherwise be curtailed.
However, the report says policy reforms are needed to accelerate deployment. The association is calling for modernizing hydropower licensing under the Federal Power Act, expanding tax incentives for upgrading existing hydropower facilities, and reforming wholesale electricity market rules to improve compensation for long-term energy storage resources.
It also recommends that the U.S. Department of Energy use its loan guarantee authority and grid resilience programs to de-risk the construction and financing of new pumped storage energy projects.
According to the NHA, unlocking the proposed pumped storage pipeline could provide the long-term storage and reliable service needed to support continued data center expansion while maintaining grid stability and controlling electricity costs for consumers.
