Hydrostor executive provides snapshot of extended pipeline of long duration storage projects

Armed with financial backing from heavyweights Goldman Sachs and CPP Investments, Hydrostor is preparing one of the more aggressive and widespread rollouts of long duration storage in the US, according to President Jon Norman.

In an interview with NPM, Norman outlined a sizable slate of queue positions the company has in its pocket in the US for its pipeline of compressed air storage projects beyond announced projects like Willow Rock in California. These positions include “two or three” in California and “three or four” in both Arizona and Nevada, which Norman says will be used to serve local utility needs and, potentially, further serve California demand for long duration storage.

“All of these projects are in very active development, but they’re not formally announced,” Norman said. “We’re still waiting to confirm what their commercial pathway is.”

Beyond these locked in positions, Norman says the company is also “working on” another three positions in the New York market, though he says the timing on those will depend on state regulators. Other projects with active origination beyond the US include Ontario, Canada, the UK, and Australia.

Norman says all of these advanced compressed air storage (A-CAES) projects are outlined for 500 MW of capacity and 8 hours of duration, which he says the company has identified as the “sweet spot” for cost-effectiveness.

Although Norman says these are the primary areas the company has identified as the most near-term based on long duration storage demand and Hydrostor’s own limited bandwidth, he notes the company’s compressed air technology, which is applicable in any reservoir, can be utilized “virtually anywhere.”

With that in mind, Norman also discussed some of the market dynamics in other markets like ERCOT and PJM where he says the company could expand in the future. While he says he sees the massive load growth in Texas as a potential driver for long duration storage demand, he also notes the planned buildout of natural gas in the state as a mitigator of that demand.

On the other hand, he notes that long duration storage like Hydrostor’s compressed air technology could become valuable for the industrial load drivers in Texas like data center developers that have to balance a push for renewables with 24/7 power needs.

“If you can package that together with commercial and institutional investor needs, it can be a pretty compelling business case,” Norman said. “Projects like ours could be the backbone of portfolios being built out by major load drivers like Google, Microsoft and Amazon that are looking at aggregating this stuff together.”

Norman says Hydrostor’s partnership with Goldman Sachs and CPP has served as the backbone funding much of the firm’s growth over the last two years. Additionally, he says the IRA’s standalone storage tax credit has been “absolutely key” in rolling out the company’s US pipeline, particularly with the domestic content tax adder in play. Finally, Norman says state mandates for long duration storage like in California and those being developed in New York and Ontario are also driving the firm’s buildout in those states thanks to the added attractiveness for financiers.

Norman is also looking for additional partners across the debt, equity, and corporate sides of the capital stack.

Right now, he says Hydrostor is currently working with financing partners on its Willow Rock and Silver City projects, which are “tracking toward clear financial close dates. Norman says its Willow Rock project in California will be its third project to reach completion after the completion of a small project in Ontario, Canada in 2020 and the planned completion of its Silver City project in Australia in 2027.

Beyond that, Norman says additional announcements on the debt side are expected to come in over the next few months with announcements on additional corporate raises also earmarked within the next year.

Another potential revenue driver for Hydrostor is its ability to sell its own technology on a turnkey basis to entities interested in their own project builds like utilities. Norman says several such deals are in the works now with several US utilities. Although he stops short of naming them, he describes them as “major ones you would know.”

Beyond this, he says the company is working to get its projects included in utility IRPs and RFPs, which is where he says the IRA has been particularly effective in terms of utility modeling for long duration storage. Overall, Norman says he has noticed a “big shift in utility interest over the last couple of years,” stemming from both renewable penetration as well as retiring fossil fuel assets.

“There’s a giant gap between load growth and [current capacity], so they’re realizing short duration storage isn’t enough,” Norman said.

However, Norman notes that some utilities are planning out their procurement plans further than others, which he warns could leave some of the slower movers to be caught flat footed when they get closer to the 2030 mark.

“Utilities have to act on early 2030s needs now because project development cycles are so long,” Norman said. “Utilities are starting to see that, but it’s a mixed bag on which ones are planning out that far in advance and which are just focusing on the next few years.”

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

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