Moving Water Around The San Diablo dam has electricity generating turbines on a chute that connects lower and upper reservoirs. During the day, water is drained from the upper reservoir to the lower to produce electricity. But at night, electricity is used to pump the water back up to the upper reservoir. Since the water is just going back and forth, how can wealth be generated?

Peak demand for electricity is during the day when but the system has excess capacity at night. This makes electricity expensive to produce during peak times during the day but cheap to produce at night. The system uses the excess capacity to move the water uphill at night, so that it can meet peak demand during the day. In the morning, the water has a higher value at the top than at the bottom.