*3.3. Feasibility Analysis*

The previous section has revealed that the maximum spreads between the income from selling electricity and the cost for purchasing electricity when participating in the ancillary services markets as well as the operating margins of UPSH plants are significantly reduced when the designed DTC increases from 4 to 10 h. However, when the DTC increases, the output power of the FT decreases and the investment costs of UPSH are reduced. This means that the economic feasibility of UPSH plants strongly depends on the investment costs. To introduce this variable in the analysis, the EBIT, PB, NPV and IRR are shown in Figure 6 for HPS 3, considering an investment cost between 1000 and 3000 € kW−<sup>1</sup> for DTCs between 4 and 10 h. In this scenario, a UPSH plant with surface upper reservoir is considered (Figure 2a). Although the lifetime of UPSH plants could be between 60 and 100 years, a typical operation time of 35 years has been considered here in order to calculate the amortization costs [32,33]. Due to amortization costs, the EBIT decrease in all DTCs when the investment costs increase from 1000 to 3000 € kW−<sup>1</sup> (see Figure 6a). The red line represents the limits where the EBIT turn into negative numbers. Precisely, the minimum EBIT are <sup>−</sup>8.32 M€ year−<sup>1</sup> when the investment cost is 3000 € kW−<sup>1</sup> and the DTC is 4 h.

In Figure 6b, a minimum PB of 9 years is obtained when the investment cost is 1000 € kW−<sup>1</sup> and the DTC is 10 h. The PB increases to 34 years when the investment cost is 3000 € kW−<sup>1</sup> and the DTC is 4 h. PBs lower than or equal to 20 years are reached when the investment costs are lower than 2000 € kW−<sup>1</sup> and the DTC is greater than 6 h. In Figure 6b, the NPV decreases sharply when the investment cost increases. Again, a red line represents the border between positive and negative values. An NPV of –581 M€ is reached when the investment cost is 3000 € kW−<sup>1</sup> . The NPV increases to 294 M€ when the investment cost is reduced to 1000 € kW−<sup>1</sup> and the designed DTC is 10 h. Finally, a maximum IRR of 12.92% is obtained when the investment costs are 1000 € kW−<sup>1</sup> and the DTC is 10 h.

IRRs greater than or equal to 6% are reached when the investment costs are lower than 2000 € kW−<sup>1</sup> and the DTC is greater than 5 h. *Appl. Sci.* **2020**, *10*, x FOR PEER REVIEW 10 of 16

**Figure 6.** Feasibility analysis of HPS 3 with surface upper reservoir, considering DTCs between 4 and 10 h and investment costs between 1000 and 3000 € kW<sup>−</sup>1. (**a**) Earnings before interest and taxes (EBIT), where the red line represents zero EBIT; (**b**) payback period; (**c**) net present value (NPV), where the red line represents zero NPV; (**d**) internal rate of return. **Figure 6.** Feasibility analysis of HPS 3 with surface upper reservoir, considering DTCs between 4 and 10 h and investment costs between 1000 and 3000 € kW−<sup>1</sup> . (**a**) Earnings before interest and taxes (EBIT), where the red line represents zero EBIT; (**b**) payback period; (**c**) net present value (NPV), where the red line represents zero NPV; (**d**) internal rate of return.

According to the calculated investment costs, the profitability of each HPS is finally presented in Table 3, considering a DTC of 8 h as well as the digging of new caverns or tunnels as a lower reservoir for UPSH plants, where an investment cost of 3138 € kW−1 was estimated in Section 3.1. A pumping cycle time of 10.64 h has been assumed. As indicated previously, maximum output powers of 62, 109 and 219 MW have been considered for HPS 1, HPS 2 and HPS 3, respectively. The EBIT increase from 554.85 k€ year−1 in HPS 1 to 3335.28 k€ year−1 in HPS 3. The NPVs are negative in all HPSs, while the IRRs obtained are lower than 2.75%. Finally, high PBs (greater than 24 years) have been reached. Therefore, the construction of new underground infrastructure as the lower reservoir of a UPSH plant is not economically feasible. According to the calculated investment costs, the profitability of each HPS is finally presented in Table 3, considering a DTC of 8 h as well as the digging of new caverns or tunnels as a lower reservoir for UPSH plants, where an investment cost of 3138 € kW−<sup>1</sup> was estimated in Section 3.1. A pumping cycle time of 10.64 h has been assumed. As indicated previously, maximum output powers of 62, 109 and 219 MW have been considered for HPS 1, HPS 2 and HPS 3, respectively. The EBIT increase from 554.85 k€ year−<sup>1</sup> in HPS 1 to 3335.28 k€ year−<sup>1</sup> in HPS 3. The NPVs are negative in all HPSs, while the IRRs obtained are lower than 2.75%. Finally, high PBs (greater than 24 years) have been reached. Therefore, the construction of new underground infrastructure as the lower reservoir of a UPSH plant is not economically feasible.

**Table 3.** Profitability analysis of HPS 1, HPS 2 and HPS 3, considering the construction of new tunnels

**EBIT and Profitability HPS 1 HPS 2 HPS 3 EBIT (k€ year−1)** 554.85 1,352.20 3,335.28 **NPV (k€)** −41,570.22 −65,194.66 −118,307.90 **IRR (%)** 2.43% 2.61% 2.75%

or caverns, DTCs of 8 h and a lifetime of 35 years.

The profitability analysis of HPS 1, HPS 2 and HPS 3 is shown in Table 4, considering an investment cost of 1675 € kW−1 (estimated in Section 3.1) and a DTC of 8 h. The results obtained when


**Table 3.** Profitability analysis of HPS 1, HPS 2 and HPS 3, considering the construction of new tunnels or caverns, DTCs of 8 h and a lifetime of 35 years.

The profitability analysis of HPS 1, HPS 2 and HPS 3 is shown in Table 4, considering an investment cost of 1675 € kW−<sup>1</sup> (estimated in Section 3.1) and a DTC of 8 h. The results obtained when the existing underground infrastructure is used are much better than those of the previous scenario. The maximum NPV is 185.70 M€ and has been obtained in HPS 3, while the IRR increases to 7.10%. The minimum IRR is reached in HPS 1 (6.6%). Finally, the minimum PBs decrease to 15 years in all HPSs. This demonstrates that a UPSH plant could become economically feasible using the existing infrastructure and participating in the ancillary services markets.

**Table 4.** Profitability analysis of HPS 1, HPS 2 and HPS 3, making use of existing infrastructure and considering DTCs of 8 h and a lifetime of 35 years.

