energies Article Risk Mitigation and Investability of a U-PHS Project in The Netherlands Gert Jan Kramer 1,* , Twan Arts 2, Janos L. Urai 3,4 , Han Vrijling 5 and Jan M. H. Huynen 6 1 Copernicus Institute of Sustainable Development, Utrecht University, Princetonlaan 8a, 3584 CB Utrecht, The Netherlands 2 O-PAC Ontwikkelingsmij, Vrijthof 48, 6211 LE Maastricht, The Netherlands; [email protected] 3 Institute for Structural Geology, Tectonics and Geomechanics, RWTH Aachen University, Lochnerstrasse 4-20, D-52056 Aachen, Germany; [email protected] 4 Geostructures—Consultancy for Structural Geology and Geomechanics, Hunnenweg 9, 6224 JN Maastricht, The Netherlands 5 Department of Hydraulic Engineering, Delft University of Technology, Stevinweg 1, 2628 CN Delft, The Netherlands; [email protected] 6 Sogecom B.V., Vrijthof 48, 6211 LE Maastricht, The Netherlands; [email protected] * Correspondence: [email protected]; Tel.: +31-30-253-7948 Received: 13 July 2020; Accepted: 23 September 2020; Published: 28 September 2020 Abstract: We review the status of a 1.4 GW, 8 GWh underground pumped hydro storage (U-PHS) project in the southern Netherlands, which has been under development since the 1980s. Its history shows how the prospect of a large-scale U-PHS for The Netherlands (a country whose proverbial flatness prohibits PHS) has been attractive in every decade, based on proven technology in a subsurface location with validated properties, and solid analysis of its economics. Although the ongoing energy transition clearly requires massive electricity storage, (U-)PHS projects are challenging investment propositions, in The Netherlands, as elsewhere. This case study illustrates a point of general relevance, namely that although the project execution risk, related to uncertainty with respect to subsurface integrity, is very low, the transition risk, associated with the intrinsic uncertainties of an electricity system in transition, is significant. We point out mitigation strategies for both risk categories. Keywords: pumped hydro storage; electricity storage; renewable energy; electric grid stabilization; energy transition; regional economic development 1. Introduction and Project History Pumped hydro storage (PHS) is the dominant technology to store energy. It uses a water reservoir at elevated heights to store a surplus of electricity supply and releases it to generate electricity when there is a supply shortage. PHS accounts for 95% of the 191 GW grid-connected storage globally [1]. The Netherlands and Denmark are the only countries in Western Europe without significant relief. As a consequence, storage based on conventional PHS is not an option. Underground pumped hydro storage or U-PHS [2], illustrated in Figure1, would therefore seem to be an option of obvious interest to The Netherlands [3]. The country has a well-known subsurface with a layer of strong and stable limestone of Dinantian age in the Southern Netherlands at a depth of 1000–1500 m, eminently suitable for U-PHS projects. In this paper, we pose the question of why it has proven so difficult to realize the first Dutch U-PHS project, a project that has been on the drawing board since the 1980s and that, in each subsequent decade, was shown to be an attractive addition to the Dutch and regional (Dutch, Belgium, German) electricity infrastructure. Energies 2020, 13, 5072; doi:10.3390/en13195072 www.mdpi.com/journal/energies Energies 2020, 13, 5072 2 of 18 Energies 2020, 13, x FOR PEER REVIEW 2 of 17 Figure 1. Schematic profile profile (only approximately to sca scale)le) of the O-PAC underground pumped hydro storage (U-PHS) in the area around Geverik, Limburg, showing a simplifiedsimplified geologic structure with Dinantian KolenkalkKolenkalk formation formation below below about about 1000 1000 m. Them. The lower lower reservoir reservoir consists consists of a system of a system of tunnels of abouttunnels 12 about km long 12 km with long approximately with approximately 16 m diameter, 16 m diameter, distributed distributed over an areaover of an about area of 500 about1000 500 m. × × 1000 m. The history of O-PAC, an acronym for Ondergrondse Pomp Accumulatie Centrale (Dutch for undergroundThe history pump of accumulationO-PAC, an acronym plant), afor 1.4 Ondergrondse GW, 8 GWh, 2Pomp billion Accumulatie¿ project plan Centrale for U-PHS (Dutch in thefor provinceunderground of Limburg pump accumulation in the south of plant), The Netherlands, a 1.4 GW, 8 isGWh, reviewed 2 billion in Section € project2. In plan Section for U-PHS3 we review in the theprovince project-specific of Limburg geologic in the south and geotechnical of the Netherlands, information is reviewed in the Southern in Section Netherlands 2. In Section and 3 we show review that the project-specific presence of suitable geologic rock and formation geotechnical at the information required depth in the has Southern been convincingly Netherlands demonstrated,and show that andthe presence in addition of costsuitable of construction rock formation can beat minimizedthe required by depth choosing has been a location convincingly with minimal demonstrated, karst and naturaland in addition fractures. cost In of Section construction4 we present can be a mini benefitmized/cost by analysis choosing of a the location project with under minimal current karst market and regulations,natural fractures. but with In Section a power 4 we supply present portfolio a benefit/ thatcost increasingly analysis of relies the project on intermittent under current renewables, market asregulations, per the projections but with a of power the Dutch supplyKlimaatakkoord portfolio that[4 ],increasingly this reveals relies that only on intermittent half of the financial renewables, benefit as isper reaped the projections by the O-PAC of the owner; Dutch theKlimaatakkoord other half is [4], societal this reveals benefit that that only accrues half toof consumersthe financial as benefit lower (average)is reaped electricityby the O-PAC price, owner; to transmission the other systemhalf is societal operators benefit through that grid accrues stabilization, to consumers and to as owners lower of(average) renewable electricity generation price, in to the transmission form of higher system prices operators at times through of renewable grid stabilization, oversupply. and to owners of renewableThese three generation sections in show the thatform as of a high businesser prices proposition, at times of O-PAC renewable is a low-risk, oversupply. low-return project. However,These considered three sections as an show infrastructure that as investment,a business theproposition, project is attractiveO-PAC is and a low-risk, has a good low-return monetary returnproject. provided However, the considered downside as risk an ofinfrastructure change in market investment, regulation the project is covered. is attractive Moreover, and has the projecta good hasmonetary considerable, return provided but less tangible, the downside non-financial risk of benefitschange byin market making regulation the Dutch andis covered. regional Moreover, electricity systemthe project more has resilient. considerable, From a technicalbut less andtangible, techno-economic non-financial perspective, benefits by O-PAC making has the characteristics Dutch and whichregional make electricity it complementary system more resilient. to the more From fashionable a technical and modes techno-economic of supply–demand perspective, management, O-PAC viz.has characteristics battery storage which and demand-sidemake it complementary management. to the This more is discussedfashionable in modes Section of5 ,supply–demand which is more conjecturalmanagement, in viz. nature, battery but setsstorage us upand for demand-side the conclusion management. in Section6 ,This where is wediscussed will argue in Section that the 5, investmentwhich is more potential conjectural of O-PAC, in nature, and but by extensionsets us up anyfor the U-PHS, conclusion or indeed in Section any large-scale 6, where we storage will project,argue that is hampered the investment by it being potential high-risk-low-return of O-PAC, and fromby extension a private any investor U-PHS, perspective, or indeed while any large- being low-risk-good-returnscale storage project, from is hampered a societal perspective.by it being Thishigh-risk-low-return points to market failurefrom anda private the critical investor role perspective, while being low-risk-good-return from a societal perspective. This points to market failure and the critical role that government will have to play in creating the conditions under which U-PHS becomes investable through public–private partnership. Energies 2020, 13, 5072 3 of 18 that government will have to play in creating the conditions under which U-PHS becomes investable through public–private partnership. 2. History and Main Characteristics of O-PAC Because of the global dominance of PHS for electricity storage and the absence of suitable topography in The Netherlands, over forty years ago the first suggestions had already been made to use subsurface reservoirs for PHS, creating an underground PHS (U-PHS). At the time, the Dutch government and the public-owned utility companies saw an emerging need for storage to optimize their electricity production portfolio, as large-scale storage would allow simultaneously the maximization of the utilization of base load capacity (coal and nuclear) and the minimization of the use of peak load capacity (gas and oil) [5]. The question was raised whether the then