# Economic Feasibility of Underground Pumped Storage Hydropower Plants Providing Ancillary Services
## 1 Introduction  
The rapid growth of intermittent renewable energy sources (RESs) for electricity generation requires flexible large-scale energy storage systems (ESSs). Electricity generated by some forms of RESs, such as wind or solar photovoltaic (PV), is difficult to forecast; therefore, ESSs are required for balancing electricity supply and demand [1]. Pumped storage hydroelectricity (PSH) is the most mature and efficient storage technology and accounts for 98% of storage capacity worldwide [2]. However, the development of new PSH projects is limited by topographic and environmental restrictions. Thus, disused underground space may be used as reservoir for large-scale storage systems such as underground pumped storage hydropower (UPSH) or adiabatic compressed air energy storage (A-CAES) [3, 4] where the typical round trip energy efficiencies exceed 0.7-0.8 [5, 6]. Unlike conventional PSH plants, which consist of two water reservoirs located at the surface, both upper and lower reservoirs may be underground in the case of UPSH plants. For that purpose, two different options may beconsidered: (1) to make use of existing infrastructure; or (2) to dig new tunnels. Winde et al. [7; 8] explored the use of deep-level gold mines in South Africa for UPSH schemes. Pujades et al. [9; 10] carried out a study considering the use of a closed slate mine located at Belgium with a capacity of 550,000 m\({}^{3}\) as a lower reservoir for UPSH. Bodeux et al. [11] analyzed the interactions between groundwater and the slate chambers used as a subsurface water reservoir. Closed coal mines in Spain and Germany have also been proposed as underground reservoirs for UPSH [12; 13; 14; 15]. Wong [16] proposed digging new tunnels or shafts as a lower reservoir for UPSH in the Bukit Timah granite of Singapore. The economic feasibility of UPSH plants depends on the capital costs and the price spread between the electricity generated and consumed in turbine and pumping modes, respectively. In the Iberian electricity system, RES generation is granted priority during the dispatch and receives a fixed feed-in tariff. The day-ahead prices (spot prices), are set around noon on the day preceding the delivery. The day-ahead markets are complemented by intraday markets and ancillary services in the case of unforeseen events and changing weather conditions, which mainly could affect wind and solar PV generation. Finally, the balance of the electricity demand and supply is achieved through the ancillary services, which are managed by the system operator, taking the form of auctions in the Iberian electricity system. Traditionally, a PSH plant has been operated by the price-arbitrage strategy. PSH plants have participated in the day-ahead market, selling the electricity generated at peak periods (peak price hours) and purchasing the electricity at off-peak periods [17; 18]. However, the electricity price spread between the on-peak periods and off-peak periods has been reduced significantly, and the economic feasibility of a PSH might not be guaranteed participating just in the day-ahead electricity market. Lobato et al. [19] carried out an overview of ancillary services in Spain, including a technical description and the management of the ancillary services markets. The study highlights the paramount importance of the ancillary services in a power system. Perez-Diaz et al. [20] reviewed the trends and challenges of PSH plants with the aim of optimizing their operation in the balancing markets. The study showed that ancillary services markets, particularly those related to balancing supply and demand, emerge as a valuable source of income for PSH plants. Krishnan and Das [21] studied the feasibility of CAES plants participating in the day-ahead and balancing markets of PJM and Midcontinent Independent System Operator (MISO), concluding that the profit may be increased 10-fold by providing ancillary services. Berrada et al.