Ming Hu Reservoir is the lower lake dam for Daguan II, and it is located within the boundaries of Mingtan Village in Shueili Township southwest of Sun Moon Lake. In 1981, the Taiwan Power Company started construction on the “Ming Hu Pumped Storage Power Plant”, which was completed in August 1985. This is not only Taiwan's first pumped storage power plant, but also happens to be the largest underground power plant in the Far East.
“Pumped storage” functions along the principle of using the off-peak (late evening) surplus electric power produced by the 2nd and 3rd Nuclear Power Plants, which is pumped from the lower lake dam to the upper lake dam (Sun Moon Lake) for storage. This continues until on-peak hours (noon and dusk), when the upper lake dam (Sun Moon Lake) discharges water to generate electric power, and the water is once more stored in the lower lake dam. This recycling use of water is able to produce low-cost electricity.