Powering AI: Can Pumped Hydropower Storage Meet the Energy Surge?

By Timothy D. Stark and Ana Pinheiro Privette

The rapid growth of artificial intelligence (AI) is significantly increasing demand for both electricity and water. Data centers, which provide the computational infrastructure for AI systems, are among the fastest-growing electricity consumers in the United States. Recent analyses estimate that U.S. data-center electricity consumption could increase from roughly 176 TWh in 2023 to between 325 and 580 TWh by 2028, driven largely by the expansion of AI workloads and cloud computing services (LBNL, 2024). If realized, this growth could raise the share of total U.S. electricity consumption attributable to data centers from roughly 4–5% today to as much as 9–12% by the end of the decade (IEA, 2024; LBNL, 2024). The rising computational demands of large AI models require vast amounts of power for servers, networking equipment, and supporting infrastructure. In addition, these facilities generate large and continuous amounts of heat that must be removed to prevent equipment overheating. Many widely used cooling technologies—such as evaporative cooling towers—therefore require significant volumes of freshwater.

Renewable energy sources, such as solar and wind, are increasingly used to meet this growing electricity demand. However, renewable generation introduces new operational challenges because these resources are inherently intermittent. Solar power produces electricity only during daylight hours, while data centers typically operate continuously to meet global user demand and automated workloads that run around the clock. Integrating large shares of renewable electricity therefore requires additional grid infrastructure, including battery storage, flexible generation, and other grid-balancing resources capable of maintaining reliable power supply when renewable output fluctuates (LBNL, 2024; IEA, 2024).

One technology that can provide large-scale, reliable, environmentally friendly, on-demand electricity to complement renewable energy is pumped storage hydropower (PSH). PSH is currently the most widely deployed form of grid-scale energy storage in the world. The technology operates by moving water between two reservoirs located at different elevations. When excess electricity is available—often during periods of high solar or wind generation—electric pumps move water from a lower reservoir to an upper reservoir, storing energy as gravitational potential. When electricity demand rises, water is released from the upper reservoir through turbines that generate electricity as it returns to the lower reservoir. Because this process can be repeated many times, pumped storage acts as a large rechargeable battery for the power system, helping balance supply and demand, and improving grid reliability (U.S. Department of Energy, 2021; IEA, 2023).

Globally, pumped storage accounts for more than 90% of installed grid-scale energy storage capacity, and individual facilities often operate at scales of hundreds to thousands of megawatts (IEA, 2023; U.S. Energy Information Administration, 2024). Its deployment in the United States is relatively limited in terms of the number of facilities, even though it dominates grid-scale storage capacity. As of 2023–2024, the United States had about 43 operational pumped-storage plants located across 18 states, with a combined capacity of roughly 23 GW of generation and storage capability (US EIA, 2026). 

Despite the relatively small number of plants, pumped storage remains extremely important for the U.S. power system because the facilities are large. These projects account for about 90–96% of utility-scale energy-storage capacity in the United States, far exceeding other storage technologies such as lithium-ion batteries, compressed air storage, and flywheels, which have historically contributed much smaller shares because they are typically deployed at smaller scales or were introduced more recently. In the past few years, however, rapid growth in battery storage—driven largely by renewable-energy integration—has begun to reduce the dominance of pumped storage in terms of installed capacity, although PSH still remains the largest single storage technology in the U.S. power system (EIA, 2024; U.S. Department of Energy, 2023).

Most U.S. pumped-storage capacity is concentrated in a small number of states. The largest shares occur in California (about 17% of national capacity), Virginia (14%), South Carolina (13%), Michigan (9%), and Georgia (8%) (U.S. Energy Information Administration, 2026). One prominent example is the Bath County Pumped Storage Station in Virginia, the largest pumped-storage facility in the world. Often referred to as the “largest battery in the world,” the plant has a maximum generating capacity of about 3,003 MW, an average output of approximately 2,772 MW, and a total storage capacity of roughly 24,000 MWh. The facility operates by transferring water between two reservoirs separated by approximately 1,260 feet (about 384 meters) in elevation (U.S. EIA, 2026).

Most pumped-storage hydropower systems consume more electricity to pump water to the upper reservoir than they ultimately generate when the stored water is released through turbines. As a result, pumped-storage facilities typically have net negative annual electricity generation balances when viewed purely in terms of energy production. This is because energy is lost during the pumping, storage, and generation cycle, resulting in round-trip efficiencies typically ranging from about 70% to 85% (U.S. Department of Energy, 2021; U.S. Energy Information Administration, 2024). However, pumped storage is not intended to produce net energy; rather, it functions as a large-scale energy storage and grid-balancing technology.

These systems store electricity when it is abundant and relatively inexpensive—such as during periods of high solar or wind generation—and release it when demand rises or renewable output declines. For this reason, integrating pumped storage with renewable energy sources is increasingly viewed as a key strategy for improving the flexibility and reliability of modern power systems. By pairing pumped-storage operations with solar and wind generation, excess renewable electricity can be stored and later dispatched when needed, allowing the technology to operate primarily as a long-duration storage system that stabilizes renewable-dominated grids (International Energy Agency, 2023; U.S. Department of Energy, 2021).

The number of PHS facilities in the United States has remained relatively stable for several decades. However, interest in new pumped-storage projects is increasing as electricity demand grows and renewable generation expands. These systems can respond quickly to changes in electricity demand, providing services such as peak-load generation, frequency regulation, and backup power during periods of reduced renewable generation, for example, after sunset.

As electricity demand grows—especially from energy-intensive sectors, such as AI and data centers, pumped storage is increasingly viewed as a key technology for providing long-duration energy storage while maintaining grid reliability. However, it also introduces several environmental and operational concerns. PHS systems require large reservoirs that can lead to land use changes, habitat disruption, and potential impacts on water quality and ecosystems.

Although pumped storage largely recirculates the same water between reservoirs via a closed-loop system, water management remains an important consideration, particularly in arid regions. Water is required initially to fill the reservoirs, and additional water may occasionally be needed to replace losses from evaporation or seepage. However, operational withdrawals are generally much smaller than those associated with conventional hydropower because the same water is repeatedly reused within the system (U.S. Department of Energy, 2021). Projects involve high construction costs, long permitting processes, and complex regulatory reviews, often overseen by the Federal Energy Regulatory Commission. In addition, communities sometimes raise concerns about landscape alteration, infrastructure impacts, and potential ecological effects. As a result, while PHS remains one of the most established technologies for large-scale energy storage, its deployment requires careful evaluation of environmental, social considerations, and impact om water resources (U.S. Department of Energy, 2021; IEA Hydropower, 2020).

To reduce evaporation losses and enhance energy production, some projects are exploring the integration of floating solar panels installed on geomembrane-covered reservoirs, often referred to as floating photovoltaics (FPV). In these systems, solar panels are mounted on floating platforms or anchored to flexible geomembranes that cover portions of the water surface (Stark et al., 2007; Stark and Newman, 2010). This configuration provides several advantages. First, the geomembrane and panel system reduces evaporation by shading the water surface, which can be particularly valuable in hot and arid climates where reservoir evaporation losses are high. Second, the solar panels generate electricity during the day that can help power pumping operations in pumped-storage systems, effectively coupling solar generation with energy storage. Third, the cooling effect of water beneath the panels can improve photovoltaic efficiency compared with land-based solar installations (World Bank, 2019; IEA, 2023).

In addition, pumped-storage reservoirs may offer opportunities for integrated energy–water infrastructure. In some proposed configurations, stored water could potentially support industrial cooling or other auxiliary uses, including cooling systems for nearby data centers, provided appropriate water treatment and environmental safeguards are in place. Such integrated systems could improve overall resource efficiency by combining renewable energy generation, long-duration energy storage, and water management within a single infrastructure platform.