- Goldman Sachs on Monday announced a $250 million investment in long-duration energy storage provider Hydrostor, the latest in a line of investments in the emerging long-duration storage market.
- Toronto-based Hydrostor uses a novel advanced compressed air energy storage (A-CAES) technology that can store energy in large underground caverns, including those left from hard rock mining. The company has a demonstration project on Ontario's wholesale power market and has projects planned in California and Australia.
- Hydrostor CEO Curtis VanWalleghem said the investment will help the company at least double its staff while it moves ahead with 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 lend credibility to our technology solution."
As renewables increasingly contribute a greater share of electricity production, experts agree that more long-duration storage will be necessary to weather the day-to-day and seasonal variability in wind and solar generation. While lithium-ion batteries are the dominant storage source today, the batteries are limited in their storage capability, creating a need for storage of at least eight hours.
Dan Finn-Foley, a principal consultant with PA Consulting focused on energy storage, said long-duration storage has been the "next technology up" for a long time 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 on the state level show that there is an emerging market for utility-scale and other types of storage.
"These are as much bets on policy as they are on technology," Finn-Foley said. "Long-duration storage is a solution to a problem that doesn't exist yet. It requires the 100% green or clean electricity goals that policymakers are pushing to become a necessity. It's interesting to see these institutional investors making bets that policymakers are going to follow through."
California has a goal of deploying nearly 1 GW of long-duration storage by 2026 and the state's fiscal year 2022-2023 budget includes $380 million for long-duration storage projects. The Department of Energy is working on a program to lower the cost of long-duration storage technology by 90% over the next decade and a coalition of companies including Siemens Energy, ESS and bp is building policy support for the technology.
In a statement, Charlie Gailliot, partner and head of energy transition private equity investing for Goldman Sachs Asset Management, said the world's transition to renewable energy has created an "emerging global market" for long-duration storage and that Hydrostor "will play a central role in the ongoing energy transition."
While the basic idea behind Hydrostor's technology – using energy to compress air in tunnels and relying on water to maintain pressure – is well-established, VanWalleghem said the company has modified it to reduce wasted heat and allow it to work outside of salt caverns, where most compressed air facilities are. 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 appealing locations for partners. Hydrostor has two late-stage projects in California and a third in Australia that total 1.1 GW/8.7 GWh.
"Our ability to go where the storage is needed is really appealing. 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."
The Goldman Sachs investment comes amid a flurry of investor interest in the long-duration storage market. Gravity-based storage firm Energy Vault went public in the fall through a SPAC after raising more than $100 million in a Series C fundraising round. Iron-air battery firm Form Energy announced a $200 million fundraising round, and long-duration firm FlexGen received a $150 million equity commitment from Apollo Global Management in 2021.
PA Consulting's Finn-Foley 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 the policy incentives and demands. Hydrostor's development of projects in California shows it is trying to play to that market's need for more storage than lithium-ion batteries can provide, but it could still face a crowded playing field, Finn-Foley said.
"It's critical for these technologies to find that 'Goldilocks duration' where their specific advantages give them a leg up," he said. "That means there may not be just one winner in the long-duration 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 players."