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What is pumped hydro?

Pumped hydro energy storage (PHES) schemes can generate electricity by releasing water from an upper water storage to a lower water storage, passing water through turbines that generate power. Unlike conventional hydro power generation, PHES is an energy generation and storage system where water is cycled back and forth between the two water storages of different elevations.

Water held in the upper water storage of a PHES scheme acts like a big battery to switch on when it’s not windy or sunny. Water can be pumped to the upper storage when energy is cheap and plentiful (for example when wind or solar generation provides electricity excess to demand) and stored until electricity supply is constrained or in high demand, when water can be released to the lower storage to generate electricity.

A diagram showing the components of a pumped hydro energy storage scheme. For full details, see the image description on page.
Components of a pumped hydro energy storage scheme

A diagram showing the components of a pumped hydro energy storage scheme. An upper storage on the right is connected to a lower storage on the left. The storages are connected by a conduit that passes through a turbine in an underground power station. The power station connects to electricity pylons on the surface. The diagram explains pumping mode, when excess electricity is used to pump water back to the upper storage, and generating mode, where stored water is released downhill via the turbine to generate electricity when demand is high.

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PHES schemes can be configured in different ways, which influence their water needs and relationship with existing water infrastructure and systems, such as water storages. PHES schemes can be broadly separated into two categories: bluefield and greenfield sites:

  • Bluefield schemes use at least one existing storage
  • Greenfield schemes require two new storages to be built. They may need additional infrastructure to access water from an external source.

Regardless of their type, all PHES schemes require an initial fill of water. The initial fill stage typically involves the highest water demand over the lifecycle of a PHES scheme and may take multiple years to fill.

Smaller volumes of water are required on an ongoing basis to ‘top-up’ the PHES storages to offset losses such as leakage or evaporation.

Key water-related project planning considerations

The below section summarises some key water-related aspects that a new PHES scheme should consider. For more information on how decisions are made around accessing and sharing water in Victoria, see water authorisations for pumped hydro energy storage.

This can include:

  • initial fill, required at the start to fill a closed loop system
  • ‘top-ups’ to offset water losses from evaporation, seepage and operational losses
  • water to refresh the scheme, for example to improve water quality.

The availability of water for a PHES project will depend on a number of things, including where in Victoria the project is, the source of the water (manufactured water, water from a river or from a storage), and how many existing users already have rights to water in the system.

In looking to understand the availability of water for a PHES scheme, consider:

  • Different sources that may be available, for example surface water, groundwater or manufactured water. Each offer strengths and weaknesses (e.g. availability, cost, climate resilience)
  • All but a few river systems, and groundwater systems, in Victoria are already fully allocated. This means the total volume of water entitlements already on issue in those systems is already the maximum volume that can be diverted from that system before negatively impacting the environment or other uses and values. Generally, in those systems new water users must buy water from existing users
  • Larger systems with mature trade markets provide more opportunity to access water compared to smaller systems where the volume required could potentially be greater than the volume available for consumption.

Project planning should consider the resilience of a PHES scheme during dry conditions to ensure sufficient water access in consecutive dry years.

Research suggests that due to climate change, there is likely to be reduced rainfall (particularly during the winter and spring period), and increased evaporation, leading to reduced annual average runoff. The latest Victorian Water and Climate Initiative findings can be explored more at Water and climate research.

While streamflow can be highly variable, it is expected that some aspects of this variability will increase in the future due to the influence of climate change.

In some instances, the operation of a PHES scheme may need to be altered to account for a water security or water quality risk. This may include:

  • water availability reductions during dry periods, for example where some systems have imposed rosters and restrictions on how much water can be taken from a storage or a waterway
  • a bushfire or flood event could affect the operation of a PHES scheme due to impacts on water quality from debris.

In Victoria, dam owners are responsible for the safety of their dams. Dams must meet contemporary engineering and safety standards in their design, construction and operation.

Policy, guidance and oversight to dam owners for the safety of dams in Victoria is covered at Dam safety management. This includes safety management programs, monitoring and operational measures.

Operation of a PHES scheme can lead to rapid filling sequences as water is moved between storages. This can create additional stresses on the dam infrastructure beyond what is experienced at a conventional storage. They must therefore be designed and constructed to accommodate this purpose.

For more information on dam safety requirements, please refer to:

Constructing a dam on or near a waterway can cause significant impacts, including to the environment.

Project planning should consider potential adverse effects to the environment, waterways and aquifers, from construction and operational activities. Consideration of these potential impacts is part of the licence application for constructing and operating works on a waterway (section 68 of the Water Act).

Cultural heritage near waterways is a key project consideration. Technical guidelines for waterway management contains information on Traditional Owners regarding waterway management and approvals. Water is Life Roadmap and Working with Traditional Owners in water are 2 webpages that provide information about how government is partnering with Traditional Owners to manage waterways and catchments across the state.

Consideration also must be given to development in special water supply catchment areas, to minimise or avoid affecting water quality by contaminating runoff that flows into waterways.

The Environment Protection Authority Victoria (EPA) administers the Environment Protection Act 2017 and is responsible for controlling the environmental standards for wastewater discharge. If a PHES scheme intends to discharge effluent (e.g. refreshing the PHES storage(s) to improve water quality), an appropriate licence from the EPA may be required to authorise the discharge.

For more information visit the EPA website Guidance for risk assessment of wastewater discharges to surface waters.

Development of a bluefield PHES scheme should ensure operations are compatible with the intended and existing purpose of the storage and other uses of the infrastructure, including water supply, dam operation and dam safety obligations. Introducing a PHES scheme to an existing storage can potentially impact water quality and supply to existing entitlement holders.

Proponents of a bluefield PHES project may need to enter into an agreement with the owner of the existing storage. This agreement might cover operational, legal and financial matters such as:

  • obligations to not impact the existing purpose the storage is intended for, for example supply water to other users
  • the viability and safety of existing water infrastructure to remain fit-for-purpose for PHES
  • the magnitude and timing of releases required for the scheme
  • water access details such as the water entitlement authorising access to water in the existing storage and accounting for losses incurred by PHES operations
  • who bears the costs for construction, operation and maintenance, and decommissioning of the PHES scheme
  • operating arrangements during drought, flood and bushfire
  • monitoring and reporting arrangements
  • implications for simultaneous or coordinated operation of PHES and existing operations.

In considering any potential agreement, the storage owner and operator of public water storages will need to consider how any proposal would impact their ability to maintain safe water storages, support waterway health and protect the reliability and quality of water supply to entitlement holders.

Water corporations

Large water storages across Victoria are typically owned and operated by Victorian water corporations. As well as operating key water infrastructure, water corporations also act on the Minister for Water’s behalf to make decisions about extracting and using water. Who manages our water? provides information on the urban and rural water corporations and the types of services they undertake.

For more on authorisations and Victorian legislative requirements, see water authorisations for pumped hydro energy storage.

PHES proponents are encouraged to reach out to the relevant water corporation to understand how their proposal could satisfy legislative requirements.

If you would like further information on how water-related considerations apply to your PHES project, please contact the Department of Energy, Environment and Climate Action.

Page last updated: 27/10/26