Hydrostor CEO discusses proposed 500 MW compressed air energy storage facility in California

Hydrostor Inc.’s proposed 500 MW Gem Energy Storage Center will be an underground 8-hour duration battery using compressed air in purpose-built caves.

Curtis VanWalleghem, co-founder, and CEO of the Toronto-based company told NPM that a similar technology has been around since the 1970s but could only be used in already existing salt caverns. However, Hydrostor has found a way to use the same technology but in manmade caves carved out of bedrock.

“We think that has unlocked this technology to allow it to serve the grid, because before it had low efficiency and could only be built where there were salt caverns,” VanWalleghem said, adding that Hydrostor’s innovation of creating caverns in bedrock have been proven in two different plants in Ontario, Canada. “One was a pilot plant, and one was commercial. One is six years old, and the other is three years old.”

VanWalleghem said that Hydrostor began pursuing the Gem Energy Storage Center project in Kern County, California three and a half years ago.

“It takes that long to get interconnection to the grid,” he said. “We’re excited our project has full deliverability confirmed, which means we can connect to the grid and provide all the services you need for that backup power to meet peak demands of the day.”

Now the project is going through the permitting process before it can begin construction but has an anticipated Commercial Operation Date (COD) of 2026 or 2027. VanWalleghem said the company expects to have its remaining permit from the California Energy Commission (CEC) completed in 2023. Additionally, he said there are some federal permits as well.

The CEC also recently made the decision to exempt the project from the Notice of Intention Process (NOI).

The CEC told NPM that the Gem Energy Storage Center was exempt from needing to file an NOI because it is a power plant only technologically or economically feasible to site at or near the energy source.

“This is a matter of first impression,” the CEC said in a filing about the topic from May 27. “The CEC has not previously considered this statutory exemption for any proposed power plant, nor has the CEC yet considered a project employing the advanced compression air energy storage technology.”

The Technology

The Gem Energy Storage Center will use an air compressor that takes air from the atmosphere and pressurizes it, much like the compressors used to move natural gas down pipelines. Once air is pressurized, it heats up to 200 degrees Celsius and is run through heat exchangers to pull the heat out of the air and store it in a hot water tank.

The cooled air is then sent to an underground cavern that is built into the bedrock. VanWalleghem said that this project is nothing like fracking but said it more like an underground parking garage.

To build the caverns, VanWalleghem said a shaft is sent 2,000 feet down, the area is lined with steel and hollowed out. The rock removed in the building process is used to create a berm for a small pond that will be flooded with water. As the compressed air is sent to the caverns, it displaces water inside and moves it to the pond.

“A valve holds the air in and when the grid needs power, we discharge by opening the valve, bring air to the surface and we put it in reverse through the heat exchanger to heat it up and send it through a turbine to reproduce power,” he said. “It’s a compelling solution that costs way lower than batteries, lasts 50+ years, and uses less than 5% of water and space compared to an equivalent pumped hydro plant.”

The facility stores surplus renewable power and then sends it to the grid during peak hours.

“It helps more wind and solar to come on because we’re firming up those low-priced hours and we are displacing gas peakers,” VanWalleghem said.

VanWalleghem pointed to the California Public Utilities Commission (CPUC) mandate for utilities to buy 8-hour storage “because four hours provided by lithium ion is not enough for the grid anymore. They need to start looking at longer durations.”

In March for instance, six members of California Community Power (CC Power) approved a contract to offtake Onward Energy’s 50 MW/400 MWh Goal Line battery energy storage project, while CC Power, separately, entered into an energy storage services agreement with REV Renewable’s 69 MW/522 MWh Tumbleweed project.

This means, for projects like the Gem Energy Storage Center, that a longer duration application would potentially get resource adequacy contracts, as well.

“Pumped hydro is great if you have the site, but those are few and far between,” he said. “Batteries are also great but are more tuned for shorter hours. Compressed air is a great third option to accelerate storage deployment.”

Funding and Expansion

Though Hydrostor has not disclosed or finalized the construction budget for the project, VanWalleghem said it is expected to come in around USD 1bn.

When asked about funding partners, he said that none have been announced for this project yet but that the company is backed by Goldman Sachs Asset Management and the Canadian Pension Plan Investment Board (CPP Investments). Additionally, Hydrostor completed a project development agreement with Meridiam Infrastructure’s North American group.

VanWalleghem said that Hydrostor raised USD 250m in growth capital from Goldman Sachs and USD 25m from CPP Investments for the purpose of expansion.

“We have shown our technology works and is commercially ready and offers a strong value proposition to the grid,” he said. “We would like to do dozens more of these to help with the energy transition and shut down coal and gas plants. That is where the USD 250m is being deployed. We closed that transaction 150 days ago and are busy staffing up and completing various applications to point broadly across North America and Australia.”

He explained that those areas are where the current coal markets sit.

In addition to the Gem Energy Storage Center, Hydrostor has a 200 MW and 8-hour duration proposed project in New South Wales, Australia that is anticipated to move into construction sometime next year.

*This story was originally published exclusively for NPM subscribers last month.


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