Hydrostor believes it can get three advanced-compressed air energy storage (A-CAES) projects totalling 1.1GW/8.7GWh built in California and Australia by 2026, but regulators elsewhere need to remove barriers for A-CAES and other long-duration storage technologies to thrive, the company’s CEO has said.
Energy-Storage.news spoke with Curtis VanWalleghem after his company secured a US$250 million investment commitment from two divisions of Goldman Sachs Asset Management. Alongside the CEO’s interview into that investment and discussing the value proposition of Hydrostor’s proprietary A-CAES technology, he offered an update on the three projects.
Broken Hill, Australia
In Australia, Hydrostor is developing a 200MW, eight-hour (1,600MWh) project at Broken Hill, New South Wales. It has already been selected by electricity network operator Transgrid for transmission reliability contracts and will combine revenues from that contracting with revenues from putting arbitraged energy into the National Electricity Market (NEM).
The off-take can be firmed up through further contracts with the New South Wales government and energy traders.
Hydrostor is expecting its Transgrid contract to be reaffirmed and finalised in Q2 2022, with the network provider having made public its intent to do so. The Broken Hill project is also going through permitting steps, Hydrostor has control of the land required and is doing the necessary engineering and stakeholder engagement.
“Once that contract is affirmed, we have a bit more engineering and contracting to go and then you go to a final investment decision,” VanWalleghem said, with the project expected to be online by 2025, or “maybe slightly sooner”.
Broken Hill may be a familiar name to regular readers of Energy-Storage.news as well as to our sister site PV Tech. A historic mining region in the western outback in New South Wales, it now hosts utility-scale solar and wind, and a 50MW grid-scale battery energy storage system (BESS) project is going ahead through major utility AGL.
“The main reason we’re in Broken Hill is that they’re running 40 year old diesel generators as their reliability and peaking capacity, and they’re at end of life. They don’t want to replace them with more diesel generators — given we’re in 2022,” VanWalleghem said.
“So they ran a procurement, they said: ‘We need backup power, and peaking capacity, who’s got the best solution?’
“They got a whole bunch of bids: batteries, gas, diesel, you name it, and ultimately, they selected us as offering the best value proposition.”
The long-term Transgrid contract, a capacity payment for reliability, only counts for a portion — albeit a significant portion — of the project’s revenue. The ability to play into the NEM will provide the balance.
The fact that Broken Hill is so remote, with only a weak grid connection and high shares of renewables, means that Hydrostor will be able to reduce the curtailment of wind and solar when they are generating more than the local network can handle. The A-CAES can then be charged cheaply from that local clean energy generation and sell power at peak times for higher prices.
Hydrostor’s facility is so large in scale that it can turn the region into a green microgrid through its indirect support of local renewable resources, the CEO said.
Pecho, Gem, California
In California meanwhile, as reported by Energy-Storage.news recently, the company has filed for power plant licensing with the California Energy Commission (CEC), through the Application for Certification process.
Those applications were filed towards the end of 2021 and the CEO said its typical for that certification to take about a year to be attained.
One project, called Pecho, is in California’s San Luis Obispo County, and will be 400MW/3,200MWh. The other, called Gem is 500MW/4,000MWh and is in Kern County. Land and grid interconnections have been secured for both.
Curtis VanWalleghem said Hydrostor won’t publicly reveal the details of the off-take contracts for the California pair at this stage: “but suffice it to say you don’t normally go this far in permitting if you don’t have confidence in your off-take”.
The company expects to be able to make some announcements in that area during the first half of this year for one project and towards the end of this year for the other. They would then go to their final investment decision next year and construction could begin for the plants to be online in 2026.
Lithium-ion battery storage systems, generally speaking, tend to spend much more of their working life delivering ancillary services, which require higher power for shorter durations.
For A-CAES, Hydrostor plans for roughly half of revenues to come from capacity contracts, most of the other half to come from arbitrage and for a “very little amount of ancillary services” to round out the revenue stack.
Fulfilling a need where the market allows it
Those systems are all planned as eight-hour duration based on the market need found at each site and in each region, but if the need arose, the A-CAES systems can scale fairly simply, the CEO said.
In California, Resource Adequacy, a sort of capacity payment mechanism through which utility companies have to ensure stable and reliable supply of energy to their customers, has an eight-hour threshold.
“So that’s why we have eight hours there,” VanWalleghem said.
Similarly, in Broken Hill, one part of the project revenue stack can come from that Transgrid capacity payment and the rest from NEM power markets, which dictate how many hours duration are desirable, but long-term energy storage agreements with the NSW government also have an eight-hour limit to them.
To increase the capacity of its systems, which store energy in huge caverns going 600 metres underground, Hydrostor only needs to “make the hole in the ground a little bit bigger”.
“Double the size, you have double the hours. So for us, the cost is very cheap to add hours — less than US$50 per kilowatt-hour of storage capacity — and you can build an eight-hour facility, run it for five years, and then expand it to be a 12 or 16-hour facility.”
Expansion can be done while facilities remain online too, which the CEO argues is an advantage over pumped hydro energy storage (PHES).
At present therefore, Hydrostor has elected to choose long-duration projects in regions with market designs or with specific circumstances that reward the ability to store and discharge electricity for eight-hours.
There are also likely to be opportunities in the corporate PPA space, he said, to help companies firm their wind and solar generation and give them 24/7 clean energy. This is likely to require about 16 hours of storage duration.
Not there yet elsewhere
A-CAES plants, Van Walleghem said, can be counted on as “reliable capacity which can be located where you need it”.
“Whether that’s eight hours, 12 hours, or perhaps 20 hours, you get paid to be there as reliable capacity. Effectively, you need some incentive to build your system, some contract that underwrites a certain portion of that capex.”
That’s why, he said, to really see the potential of long-duration energy storage, energy markets have to pay for at least eight-hour capacity.
“And not all markets are designed to do that. We’re in California, in New South Wales, because they have mechanisms to do that, but it is still opening up around the world — and there’s still regulatory changes that need to happen for long duration storage to really meet its full potential.”