For much of the energy transition, the dominant question was how quickly the world could build renewable generating capacity. Increasingly, however, another question is moving to the foreground: what happens when that electricity is generated at the wrong time?
The rapid expansion of wind and solar has transformed electricity systems, but it has also sharpened the need for technologies capable of shifting energy across time, balancing supply and demand and providing the physical services required to keep power grids stable. Against this backdrop, pumped storage hydropower is moving rapidly up the political agenda.
Global pumped storage capacity surpassed 200GW for the first time in 2025, according to the International Hydropower Association’s 2026 World Hydropower Outlook. A record 11.7GW of pumped storage was commissioned during the year, helping to take total installed pumped storage capacity to 201GW.
The wider hydropower sector also continued to expand. A total of 28GW of hydropower capacity was commissioned in 2025, taking global installed capacity to 1,469GW. Hydropower generated 4,495TWh of electricity and remained the world’s largest source of renewable power. Perhaps more significant for the sector’s longer-term prospects is the scale of what could come next. The global hydropower development pipeline now stands at 1,127GW, including 621GW of pumped storage projects across all stages of development. A further 243GW of pumped storage is already under construction worldwide.
For the IHA, these figures point to a fundamental change in the way hydropower is perceived. The sector is no longer being discussed solely in terms of renewable electricity generation. Storage, flexibility, resilience and energy security are increasingly central to its value.
“‘Water battery’ (or ‘pumped storage’ to give its more technical name) is much more than a new label. It reflects a fundamental shift in how governments are thinking about electricity systems,” says Matteo Bianciotto, Head of Policy at the IHA. “For decades, hydropower was primarily viewed as a source of renewable generation. Today, it is increasingly recognised for the flexibility, storage and grid stability services it provides.
“As power systems become dominated by variable renewable energy such as wind and solar, the ability to store electricity for hours, days and weeks becomes essential. Pumped storage is uniquely positioned to deliver that capability at scale. The term ‘water battery’ helps policymakers, investors and the public understand that these facilities perform the same system function as electrochemical batteries, but over much longer durations and with operational lifetimes measured in many decades.”
From renewable generation to energy security
That shift has been accelerated by events of the past five years. The global energy crisis exposed the risks associated with dependence on imported fuels, while geopolitical tensions have reinforced the political value of domestic energy resources. At the same time, the electricity system itself is changing. Wind and solar deployment is increasing, transport and industry are electrifying, and artificial intelligence and data centres are emerging as significant new sources of electricity demand.
“The global energy crisis, coupled with increased demands for electricity, has demonstrated the importance of secure domestic generation,” Bianciotto explains. “The rapid deployment of wind and solar has highlighted the growing need for flexibility and long-duration storage. At the same time, electrification of transport, industry and now AI-driven digital infrastructure is increasing electricity demand faster than anticipated.
“Governments increasingly understand that wind and solar generation alone are not enough. Reliable power systems require technologies capable of balancing supply and demand across multiple timescales. Pumped storage already provides the overwhelming majority of the world’s long-duration electricity storage (over 90%) making it indispensable to energy security as well as decarbonisation.”
This is the context behind the IHA’s description of 2026 as the year of the “water battery”. The phrase is deliberately simple, but the challenge it describes is becoming increasingly complex. Lithium-ion batteries have become an essential component of modern electricity systems, benefiting from dramatic cost reductions and comparatively short construction times. Yet the IHA argues that the debate should not be framed as a competition between chemical batteries and pumped storage.
“Lithium-ion batteries have experienced extraordinary cost reductions and relatively short construction timelines, making them attractive for immediate grid applications. Pumped storage requires larger upfront investment, more complex planning processes and longer development periods,” Bianciotto says. “However, these technologies are complementary rather than competing. Chemical batteries are highly effective for short-duration balancing over minutes and hours. Pumped storage delivers storage over many hours, days and, in some cases, weeks, while also providing inertia, frequency control, voltage support and black-start capability. All these are crucial services needed to reduce dependence on gas and coal plants.
“As electricity systems mature, governments are increasingly recognising that they need both technologies if they are to achieve reliable, affordable and net-zero power systems.”
IHA chief executive Eddie Rich believes the language of the “water battery” is itself helping to change perceptions.
“Yes. It translates a highly technical technology into language that immediately communicates its role,” he says. “When policymakers hear ‘battery,’ they immediately think about storage, flexibility and grid reliability. The term ‘water battery’ helps connect pumped storage with the modern energy transition rather than viewing it as legacy infrastructure.”
China demonstrates the scale of development
No country illustrates the potential scale of hydropower development more clearly than China, which accounted for more than 40% of global hydropower capacity additions in 2025 and now has more than 300GW of hydropower under construction, including 218GW of pumped storage. Construction officially began in 2025 on the Yarlung Zangbo River Hydropower Project, which is projected to become the world’s largest hydropower facility and could generate roughly three times as much electricity as the Three Gorges Dam. Yet the strategic direction of China’s energy transition is increasingly about more than simply adding generating capacity. As the country builds enormous volumes of wind and solar, hydropower and pumped storage are becoming central to grid flexibility and the integration of multiple renewable resources.
“China’s programme demonstrates what is possible when there is long-term policy certainty, integrated system planning and recognition of storage as strategic national infrastructure,” Bianciotto says. “Geographic concentration is largely irrelevant for hydropower – almost every country in the world has water and elevation. The lesson from China is that large-scale deployment is achievable. The challenge is not resource availability but creating regulatory frameworks, market signals and planning processes that allow projects to move from concept to construction.”
That challenge is increasingly being confronted elsewhere. South and Central Asia have a hydropower development pipeline exceeding 300GW. India, in particular, is emerging as a major pumped storage market, with ambitions to increase capacity from around 3.5–5GW today to as much as 100GW by 2035.
Rich believes South and Southeast Asia could be among the regions to watch over the coming decade.
“South and Southeast Asia have particularly strong potential, driven by rapidly growing electricity demand and ambitious renewable energy targets,” he explains. “Europe, meanwhile, is likely to see renewed investment as flexibility becomes increasingly valuable within highly renewable electricity markets.
“Parts of Africa and Latin America also possess exceptional untapped conventional hydro resources. I was recently in Brazil where they are committed to develop pumped storage to help reduce curtailment of their rapidly increasing wind and solar power.”
Europe’s flexibility warning
Europe may offer one of the clearest demonstrations of why flexibility is becoming so valuable. During 2025, countries including the Netherlands, Germany, Spain, Belgium, Sweden and France recorded more than 500 hours of negative electricity pricing. At the same time, renewable curtailment has emerged as a growing concern. For Rich, these are signs of a system in which renewable generating capacity is expanding faster than the infrastructure and market mechanisms needed to manage it.
“Negative prices and renewable curtailment indicate that generation capacity is growing faster than system flexibility. This is not an argument against wind or solar, it is evidence that storage, transmission and market reform must keep pace.
“The energy transition depends not only on generating clean electricity but on being able to use it when it is needed.”
The European Union and national governments are responding with market reforms, permitting changes and revenue stabilisation mechanisms intended to unlock investment in long-duration storage. The UK is among the countries exploring long-term revenue arrangements capable of reducing the risks associated with capital-intensive projects.
“Countries achieving the strongest progress generally combine integrated energy planning with long-term investment certainty and streamlined permitting,” Bianciotto says. “China’s large-scale programme demonstrates what coordinated planning can achieve. Other countries, such as the UK, are increasingly introducing long-term revenue mechanisms that provide greater revenue certainty, thereby reducing project risk and improving bankability. Paradoxically, the challenge is often not the underlying economics of the project, but rather the complexity of financing an asset with a service life exceeding 100 years.”
That mismatch between very long asset lives and shorter-term electricity market signals remains one of the central difficulties facing pumped storage developers. Although the technology can provide services for many decades, projects must often make investment decisions in markets that do not fully compensate flexibility, storage or resilience.
Asked which barrier – finance, permitting, transmission or regulation – is most damaging, Rich points to the market framework underpinning them all.
“They are interconnected, but regulation remains the underlying issue,” he says. “If markets do not properly value long-duration storage and flexibility, investors struggle to secure predictable revenues. That makes financing more difficult, delays projects and ultimately slows deployment. Addressing market design unlocks many of the other barriers simultaneously.”
For Bianciotto, the single most important policy change would therefore be “to properly value flexibility and long-duration storage within electricity markets”.
“Today, many markets primarily reward energy production while undercompensating the services that keep electricity systems reliable. If markets fully valued storage, flexibility, inertia and resilience, investment in pumped storage would accelerate significantly.”
A global renaissance
While pumped storage is attracting much of the attention, conventional hydropower is also seeing significant activity. Africa commissioned more than 4GW of conventional hydropower in 2025, making it one of the strongest regions for new additions for a second consecutive year. Major projects including Ethiopia’s Grand Ethiopian Renaissance Dam and Tanzania’s Julius Nyerere Hydropower Project have substantially increased generating capacity. The challenge now extends beyond individual power stations. Transmission investment and cross-border electricity trading will be essential if Africa is to unlock more of its large undeveloped hydropower potential.
South America is also seeing renewed momentum, with a development pipeline of around 70GW. Here, modernisation is becoming particularly important: more than half of the continent’s hydropower fleet is over 30 years old.
North and Central America, meanwhile, are focusing increasingly on life extension, modernisation and new storage. Canada fully commissioned the 1.1GW Site C project in British Columbia during 2025, while more than 60GW of pumped storage projects are in development across the US.
For Rich, the sector is entering what the IHA has described as a “renaissance”.
“The sector is certainly entering a new phase,” he comments. “The conversation is no longer only about gigawatt-hours of generation. It is increasingly about system services, storage, resilience and integration. Those capabilities place hydropower at the centre of modern electricity systems in ways that perhaps were not fully appreciated previously.”
The AI power challenge
One of the newest forces shaping electricity demand is the rapid growth of artificial intelligence and digital infrastructure. Data centres require not only enormous quantities of electricity, but also highly reliable supplies. In North America, technology companies including Google and Microsoft signed long-term hydropower supply agreements during 2025, according to the Outlook.
“Artificial intelligence and digital infrastructure are certainly emerging as significant new sources of electricity demand,” Bianciotto notes. “Data centres require not only large quantities of electricity but also continuous, highly reliable power.
“Hydropower’s combination of renewable generation, storage and system flexibility makes it particularly well suited to supporting these new loads. While AI will not replace electrification or industrial decarbonisation as major demand drivers, it is likely to become an increasingly important market for clean, reliable electricity supplied by hydropower.”
Rich says technology companies are becoming an increasingly important constituency for the sector: “Technology companies are seeking reliable, carbon-free electricity around the clock. Many are looking beyond annual renewable energy certificates toward solutions that provide continuous clean power.
“That aligns closely with hydropower’s strengths and creates new opportunities for collaboration between the digital economy and renewable infrastructure.”
Building for a changing climate
Hydropower however faces a challenge that goes to the heart of its resource base. Climate change is increasing hydrological variability in many regions. Severe droughts in parts of South America, South and Central Asia and Europe during 2025 highlighted vulnerabilities associated with water availability, while extreme weather events placed greater emphasis on resilient infrastructure.
“Climate resilience must now become a core element of hydropower planning and operation,” Bianciotto states. “Governments should invest in better hydrological forecasting, modernise existing infrastructure, strengthen reservoir management and incorporate climate scenarios into project design from the outset.
“Importantly, climate impacts vary significantly across regions. While some basins face increased variability, others may experience higher average flows. Diversified portfolios, stronger regional interconnections and modern forecasting technologies all improve resilience.
“The answer is not to build less hydropower. Rather, it is to build and operate hydropower systems that are designed for a changing climate. The most resilient countries will have built the best water infrastructure and drawn energy from them where possible.”
The industry, he adds, is already adapting through climate modelling, digital forecasting, reservoir optimisation and asset modernisation.
“The industry has made significant progress, but adaptation must continue to accelerate,” he says. “The tools to adapt the existing and future fleet are there. Developers are increasingly incorporating updated climate modelling into project design, while operators are investing in digital forecasting, more sophisticated reservoir optimisation and modernisation of existing assets.
“Climate resilience is becoming a central design principle rather than an afterthought.”
From 200GW to what comes next
The immediate milestone is significant: 201GW of pumped storage is now installed globally. But the scale of the pipeline raises a much bigger question: How much can realistically be built?
Not every project in the 1,127GW global hydropower pipeline will reach construction. Projects face different environmental, regulatory and financing challenges, and development timelines can stretch over many years.
“However, even delivering a substantial proportion of today’s pipeline would represent one of the largest expansions of renewable infrastructure ever undertaken,” Bianciotto says. “The pipeline demonstrates that resource availability is not the primary constraint; policy implementation is. Furthermore, considering only the capacity currently reported as under construction, more than approximately 400GW of hydropower is being built.”
For Rich, the 621GW pumped storage pipeline is a standout finding from the Outlook.
“One of the most striking findings is the sheer scale of the global development pipeline: more than 1,100GW of hydropower projects, including over 620 GW of pumped storage,” he observes. “It demonstrates that the technical opportunity already exists. The evidence is clear, showing that the potential is there, and projects are ready to be delivered. We just need governments and markets to create the conditions to deliver them and to make our energy future, secure.”
The IHA expects pumped storage capacity to double globally within the next 15 years. Its more ambitious scenario is considerably larger.
“This year’s Outlook tells a clear story. Pumped storage will double globally in next 10 years. But we can and must go further. If the right policy changes are made, it should triple and if governments treat water batteries and chemical batteries equally, the industry will quadruple capacity by 2040,” Rich says.
Achieving that outcome would require governments to change the way storage is planned, permitted and rewarded.
“The industry is ready to deliver, it just needs the right policy and market frameworks,” Rich points out. “Governments need to create market frameworks that reward long-duration storage, accelerate permitting, provide investment certainty through long-term revenue mechanisms and integrate storage into national energy planning.
“If those conditions are established, the global pipeline demonstrates that substantially higher deployment is entirely achievable.”
The significance of passing 200GW, therefore, may ultimately lie less in the number itself than in what it says about the direction of the global electricity system.
“It reflects a broader transition from focusing primarily on renewable generation towards building complete renewable power systems,” Bianciotto notes. “As renewable penetration increases, storage becomes increasingly valuable. Passing 200 GW illustrates that countries are beginning to invest not only in clean electricity generation but also in the infrastructure required to operate reliable, high-renewable grids.”
For a technology sometimes characterised as the “grandfather” of renewable energy, this represents a notable change in narrative. Hydropower’s age, the IHA argues, should not be confused with obsolescence.
“Perhaps the most persistent misconception is that hydropower is somehow an ‘outdated’ technology or the ‘grandfather’ of renewable energy,” Bianciotto says. “In reality, hydropower’s longevity is one of its greatest strengths. Many projects have been operating reliably for decades, demonstrating the durability and long-term value of hydropower as renewable infrastructure. That is not a sign of an industry standing still; it is evidence of a technology that has continually evolved to meet changing energy needs.”
By 2040, the organisation expects that evolution to have moved hydropower even closer to the centre of renewable electricity systems.
“By 2040, hydropower will increasingly function as the backbone of renewable electricity systems,” Bianciotto states. “Wind and solar will provide much of the energy, but hydropower and pumped storage will provide many of the services that make those systems reliable. The future electricity system will require generation, storage and flexibility working together. While ensuring electricity sources are domestic and secure.”
The “water battery”, then, is more than a rebranding exercise. As electricity systems confront rising demand, greater renewable variability, geopolitical uncertainty and a changing climate, pumped storage is being asked to solve one of the energy transition’s most difficult problems: not simply how to generate clean electricity, but how to make a clean electricity system work.
With global capacity now above 200GW and hundreds of gigawatts more under development, 2026 may indeed prove to be the year in which the water battery moved from the margins of the energy debate to the heart of it.
