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Round-trip efficiency is energy generated divided by energy consumed pumping, typically 70-80% for modern pumped storage. Because energy is lost, the peak-to-off-peak price ratio must exceed the reciprocal of efficiency — around 1.3 at 78% — before arbitrage is profitable at all.
Round-trip efficiency
Efficiency = energy out / energy in
Arbitrage break-even
Minimum peak / off-peak price ratio = 1 / round-trip efficiency
Pump and turbine hydraulic losses, penstock friction, generator and motor losses, and evaporation from the reservoirs. Variable-speed machines have narrowed the gap by operating efficiently across a wider range.
No. Frequency response, reserve capacity, black start capability and inertia provision are often worth more than energy arbitrage in modern markets.