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This paper presents a pricing mechanism for pumped hydro energy storage (PHES) to promote its healthy development. The proposed pricing mechnism includes PHES pricing mechanism and cost sharing mechanism. Regarding the PHES pricing mechanism, the existed two-part tariff is still recommended to implement at the current and future stages. Regarding the cost sharing mechanism, it is suggested that the electricity capacity fee and pumping-loss fee should be all included in the allowable transmission and distribution costs of the regional power grids, which can be further transmitted to the provincial power grids. At the same time, we also suggest to exploring other funding sources to relieve the pressure of PHES cost sharing totally through the electricity sales price.

Study on pricing mechanism of pumped hydro energy storage (PHES) under China’s electricity tariff reform