15 January 2023 |

Compressed-air, expanding market


Last week, we wrote about liquid-air and condensed-air energy storage

This week, Hydrostor and Central Coast Community Energy inked a 25-year, $775-million power purchase agreement to bring compressed-air energy storage to California. Although I’ll attribute most of that timing to luck, read Keep Cool and stay ahead of the curve, I guess!

An early rendering of the WIllow Rock CAES plant

Hydrostor will build the world’s largest compressed-air energy storage plant (500MW/4,000MWh) in Kern County, CA to service the agreement. That’d be about 5x the size of the current largest CAES facility, which China connected to the grid last year.

How do you store that much air? Think massive underground caverns. Sites for CAES are thus typically chosen with geology in mind; existing caverns are most desirable, and even creating new caverns depends a lot on the site. 

To be sure, construction on Hydrostor’s Willow Rock park will take plenty of time – permitting hasn’t begun. We’ll keep a close eye on that.

Why am I reading this now?

Long-lead time aside, it looks like this energy storage area may be primed to expand after languishing for years. Hydrostor raised $250M from Goldman Sachs last year. But other well-funded companies in this space folded in the past amidst plenty of ire and controversy

Wind and solar power operate with capacity factors of 25-35%. That means, on average, they’re only operating at full electrical production capacity a quarter to a third of the time. Even in states with a lot of renewable energy capacity, like California, Until energy storage scales up, natural gas is still king in California for electricity.

Energy storage is the missing link to serve a grid that demands power all the time with wind and solar. Batteries are great, and utility-scale battery energy storage is taking off significantly, especially in California. 

Still, even the biggest battery arrays hooking up to the grid today typically don’t offer the scale duration that the proposed 500MW / 8-hour storage facility from Hydrostor would. A comparable (in terms of duration) battery energy storage project that got the nod in California last year will be about one eight the size

Luna-LAB battery energy storage deployment in California (via Leonardo Morena)

Its potential scale gives compressed-air energy storage a potential leg-up, even if the roundtrip efficiency (from storing to re-harnessing energy) is much lower than that of batteries. 

On the other hand, there’s the matter of cost. The $775M contract appears to be for about 40% of the proposed plant’s capacity. At that rate, the cost of the contract is about $193.5 per kilowatt hour (don’t hold me to that #, as I don’t know the exact contract specs). 

As battery energy systems improve over the next five years (the time it’ll take to build this facility), they may get cheaper than that. And they have higher roundtrip efficiency (~80%+ vs. the projected 60% of Hydrostor’s facility).

Projections for the cost of battery energy storage systems from NREL

The question then will hinge back to whether batteries will be built at the same scale and duration, and whether the longer-life of a CAES facility will help make the math pencil (a cavern underground decays less rapidly than big lithium-ion batteries getting used repeatedly). And who knows, maybe by actually starting to build CAES, developers will learn and bring future costs down, too.

The net-net

Beyond everything explored above, this CAES plant will also offer an interesting case study on whether the U.S. can get out of its own way and begin developing large-scale infrastructure again. The permitting process is arduous, complicated, and long in many parts of the country, slowing the deployment of clean energy infrastructure.

Hopefully that’s not the case with Hydostor’s proposed energy storage facility. How development and construction of this project proceeds will be of major interest not just to the CAES / LAES industry, but to all renewable energy and energy infrastructure developers.