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Doe’S Billion Dollar Bet: The Largest-Ever Loan Supporting Long Duration Energy Storage

powerplant

09 January 2025

POWER Engineering

powerplant

Jan 09, 2025

POWER Engineering

For years, the U.S. Department of Energy (DOE) has championed the potential of advanced compressed air energy storage (A-CAES), and now the feds are putting a whole bunch of money where their mouth is.

Toronto-based long-duration energy storage (LDES) developer and operator Hydrostor has reached a conditional commitment for a loan guarantee of up to $1.76 billion with the DOE’s Clean Energy Financing Program, the largest-ever loan offered to support an LDES technology. The commitment includes approximately $1.5 billion of principal and approximately $280 million of capitalized interest.

Once finalized, the loan guarantee will help fund the construction of the Willow Rock Energy Storage Center, a 500 MW/4 GWh A-CAES project in Rosamond, California, that promises to provide more than eight hours of backup power to California’s grid.

“We’re thrilled to reach this conditional commitment with the DOE, which is a huge vote of confidence in Hydrostor’s technology, and shows how important energy storage will be as we prioritize the reliability and resiliency of the grid for years to come,” said Curtis VanWalleghem, Hydrostor’s chief executive officer and cofounder.

Hydrostor’s Willow Rock Energy Storage Center, which has an astounding 50+ year life expectancy, will use renewable energy or excess power from the grid to heat compressed air and pump it into underground caverns filled with water. That will force the water above ground into a reservoir, and when the grid needs electricity, Hydrostor will let the water flow back into the chamber, pushing air back to the surface to drive turbines. One company executive has likened the system to an underground water piston.

Willow Rock is in an advanced stage of development and is currently under permitting review with the California Energy Commission (CEC). The project is anticipated to create 700 peak construction jobs and 40 full-time operations jobs. Construction is targeted for later this year and commissioning is slated for 2030. Once operational, it will be the largest compressed air energy storage project in the United States, but not the only one.

Believe it or not, we’ve had our eyes on CAES for decades, but for a long time, only two plants were up and running. One facility was constructed in Huntorf, Germany in 1979, another in Alabama in 1991, and none in the following 30+ years.

The 110 MW plant in McIntosh, in southwest Alabama, was established by PowerSouth Energy Cooperative, Baldwin EMC’s wholesale power supplier. It was built above a solution-mined salt cavern located 1,500 feet underground which provides 19.8 million cubic feet of compressed air storage. The plant uses off-peak electricity to pump air into the cavern. Then, during peak periods, the McIntosh Power Plant uses that compressed air combined with natural gas to generate and supply power. One full charge provides enough electricity to supply the demands of 11,000 homes for 26 hours. After more than 30 years of operation, Power South recently took a breather for maintenance work to repair, refurbish, and upgrade its turbo-expanders and other components.

After years of dormancy, there seems to be renewed interest in using compressed air as a long-duration storage solution. A study by Global Industry Analysts predicts that the global CAES market will be worth $10.3 billion by 2026. China is on the tip of the spear, recently commissioning the first CAES project in decades and working on others, with one or another being billed as the “world’s largest.”

Stateside, Duke Energy is partnering with the Electric Power Research Institute (EPRI) to study the cost and performance of deploying Hydrostor’s advanced compressed air energy storage technology at an existing coal site in North Carolina. Last year the New York Power Authority (NYPA) pre-qualified 79 private developers and investors including Hydrostor to collaborate with NYPA on developing renewable energy generating projects, including solar photovoltaic, wind, battery storage, green hydrogen, geothermal, and related transmission.

DOE’s $1.76 billion commitment to Hydrostor’s Willow Rock project is more than three times larger than any previous loan guarantee issued to an LDES technology.

The next largest was a $504.4 million loan guarantee to finance the Advanced Clean Energy Storage (ACES) Delta project, which the DOE closed on in June 2022. The Delta, Utah endeavor has been billed as the largest clean hydrogen and energy storage facility. In September 2023, through its New Energies division, Chevron acquired a majority interest in ACES Delta, a joint venture between Mitsubishi Power Americas and Magnum Development. ACES plans to use electrolysis to convert renewable energy into hydrogen and will utilize solution-mined salt caverns for seasonal, dispatchable storage. The first project, designed to convert and store up to 100 metric tons per day of hydrogen, is under construction and is expected to enter commercial-scale operations in mid-2025 to support the Intermountain Power Project’s “IPP Renewed” initiative.

More recently, in December 2024, Eos Energy Enterprises locked in a $303.5 million loan guarantee from DOE’s Clean Energy Financing Program to expand its battery manufacturing plant in Turtle Creek, Pennsylvania.

Willow Rock will be Hydrostor’s first A-CAES project in the United States and its third utility-scale undertaking overall. It follows the 2 MW Goderich Energy Storage Centre, an operational demonstration facility in Ontario, and the Silver City Energy Storage Center, a 200 MW/1.6 GWh project under development in Australia.

In 2022, Hydrostor secured a $250 million investment from Goldman Sachs to support its project pipeline, which the company says now totals more than 7 GW globally. Hydrostor is actively pursuing projects in California, Nevada, Arizona, and New York, in addition to sales to utilities in the Southeast and Northwest of the U.S.; Australian states including New South Wales, South Australia, Western Australia, and Victoria; and Canadian provinces including Ontario, Alberta, and Newfoundland.

In an interview with UtilityDive, Hydrostor’s CEO VanWalleghem only two other long-duration energy storage technologies can currently find financing- lithium-ion batteries and pumped hydro. However, the DOE sees potential in a range of LDES tech, as it lays out in its Storage Innovations (SI) 2030 strategic initiative.

The objective of SI 2030 is to develop specific and quantifiable research, development, and deployment pathways to achieve the targets identified in the DOE’s LongDuration Storage Shot, which seeks to achieve 90% cost reductions for technologies that can provide 10 hours or longer of energy storage within the coming decade. Through SI 2030, the U.S. Department of Energy (DOE) is aiming to understand, analyze, and enable the innovations required to unlock the potential for long-duration applications in the following technologies: lithium-ion batteries, lead-acid batteries, flow batteries, zinc batteries, sodium batteries, pumped storage hydropower, compressed air energy storage, thermal energy storage, supercapacitors, and hydrogen storage.

Originally published in Renewable Energy World.

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