Hydrostor secures $250m from Goldman Sachs amid growing investor interest in long-term storage

Diving Brief:

  • Goldman Sachs announced on Monday a Investment of $250 million in long-duration energy storage provider Hydrostor, the latest in a series of investments in the emerging long-duration storage market.
  • Toronto-based Hydrostor uses new advanced compressed air energy storage (A-CAES) technology that can store energy in large underground caverns, including those left behind by hard rock mining. The company has a demonstration project in the wholesale electricity market in Ontario and has projects planned in California and Australia.
  • Hydrostor CEO Curtis VanWalleghem said the investment will help the company at least double its workforce as it continues its large-scale projects and seeks new partners. “We have shown that our technology is bankable,” VanWalleghem said. “This will support us, accelerate our growth and give credibility to our technological solution.”

Overview of the dive:

As renewables increasingly contribute to power generation, experts agree that longer duration storage will be required to cope with daily and seasonal variability in wind and solar generation. While lithium-ion batteries are the main source of storage today, batteries are limited in their storage capacity, creating a need for storage of at least eight hours.

Dan Finn-Foley, a senior consultant at PA Consulting specializing in energy storage, said long-term storage had long been the “next technology” as the market focused on lithium-ion batteries. However, he said, the Biden administration’s goal of achieving 100% carbon-free electricity by 2035 and similar goals at the state level show there is an emerging market for electricity. large-scale storage and other types of storage.

“These are as much bets on politics as they are on technology,” Finn-Foley said. “Long-term storage is a solution to a problem that does not yet exist. It demands that the 100% green or clean electricity targets that policymakers are pushing become a necessity. It’s interesting to see these institutional investors betting that decision makers will follow.”

California aims to deploying nearly 1 GW long-term storage projects by 2026 and the state’s 2022-23 fiscal year budget includes $380 million for long-term storage projects. The Department of Energy is working on a program reduce the cost of long-term storage technology by 90% over the next decade and business coalition including Siemens Energy, ESS and bp is building political support for the technology.

In a statement, Charlie Gailliot, partner and head of energy transition private equity investments for Goldman Sachs Asset Management, said the global transition to renewables has created an “emerging global market” for long-term storage. and that Hydrostor “will play a central role in the ongoing energy transition.

While the basic idea behind Hydrostor technology – using energy to compress air in tunnels and relying on water to maintain pressure – is well established, VanWalleghem said the company modified it to reduce heat waste and allow it to operate outside the salt caverns, where most compressed air installations are located. The ability to work in any hard rock cavern, he said, allows Hydrostor to be more site specific and create utility scale storage in the most attractive locations for partners. . Hydrostor has two advanced-stage projects in California and a third in Australia totaling 1.1 GW/8.7 GWh.

“Our ability to go where storage is needed is really attractive. Batteries can do that, but with our cost profile and longevity, we have a huge cost advantage,” VanWalleghem said. “Probably our biggest limitation is that we can only go so small, but with the need for so many types of storage, we know there is a market for our technology.”

Goldman Sachs’ investment comes amid a surge of investor interest in the long-term storage market. Energy Vault Gravity Storage Company released in the fall via a SPAC after raising over $100 million in a Series C fundraising round. Iron-air battery company Form Energy has announced a A fundraising of 200 million dollars, and FlexGen long-term practice received a $150 million equity commitment from Apollo Global Management in 2021.

Finn-Foley of PA Consulting said that with a variety of technologies available for energy storage, it will take time to see how the market develops and which technologies align with policy incentives and demands. Project development by Hydrostor in California shows it’s trying to meet that market’s need for more storage than lithium-ion batteries can provide, but it could still face a crowded playing field, Finn said. -Foley.

“It’s critical that these technologies find that ‘Goldilocks duration’ where their specific advantages give them a leg up,” he said. “This means there may not be just one winner in the long-term storage market, it could be a variety of companies that are all optimized at their best duration. there’s an opportunity for a lot of actors.”