Take a COOL Guess – the Fun Quiz on Clean Energy. Today’s Topic: Turning Wind Energy in Baseload with Compressed Air Energy Storage
Question: We all know that power-purchase agreements are being signed in various parts of the world, e.g., the plains states of the U.S. –at under three cents/kWh, far less than the cost of producing energy from coal. But wind is a variable resource, where coal isn’t. What would be the price of wind energy if we are to add storage from Compressed Air Energy Storage (CAES)?
Answer: Can be found at Clean Energy Answers.
Relevance: As I’m discovering while I work on my new book project: “Bullish on Renewable Energy – Eleven Reasons Why Clean Energy Investors Can’t Lose,” the migration to renewable energy is happening faster than most people understand, and it’s driven by market economics. But another way: the bad news is that we don’t seem to care about the environment; the good news is that, strangely, this doesn’t really matter. And the good news is so good that it has everyone smiling — even the family dog.
Craig,
The $0.04/kWh is simply not a true number. It’s not even close to a true number. A few years ago my father and I worked through a comprehensive analysis of CAES, and the number we worked out was $0.16/kWh. That’s just the incremental cost of stored energy. You would then have to add the $0.03/kWh on top of that.
The majority of the costs here were best-case, and involved high-end turbines, thermal storage fluid, and tubing/piping, etc.. all assuming an idealized well sealed natural cave structure. These costs would have risen or remained the same from the time when we did our analysis. At 50% efficiency, the best grids available would only afford an average of ~3 hours/day of cost-effective storage, and that’s only if you could get a magnificent PPA which provides no profit for the power company or the owner of the multi-hundred-million dollar CAES facility.
It’s possible that Texas might use an exhausted natural gas well to attempt this – since the piping and well casing are already in place and the West Texas hub on ERCOT is still the most promising market for energy storage… If that works out, then there may be an opportunity in North Dakota, since the Minnesota hub is another prime market for energy storage…
But I cannot see any real potential beyond those two, and the margins there might not be sufficient to draw further investment after the first attempts.
I know you and your dad are not CAES fans, and I have a great deal of respect for you both. But still, I tend to believe the guy from whom I got these figures (even though he’s a developer of a CAES project, and thus has a financial interest). Btw, he does, in fact, propose to use depleted natural gas caverns.
I would think that the levelized cost of energy delivered by CAES would take into consideration the extreme reliability, low cost of operation, and the fact that they are charged with energy that is essentially free or even carries a negative price (off-peak wind).
I would also think that one could look at the plants that are in operation and derive the numbers from them. For example, the plant in Alabama as been in continuous operation since 1991.
Craig,
We weren’t looking at a LCOE per se… We were looking at the projected incremental delivery cost of energy assuming a 7% discount rate and a 30 year lifetime, and a cycle efficiency of 61%. The cost of the purchased energy wouldn’t technically matter, whatever you pay for the energy coming in you must sell it for $0.16/kWh more – according to our numbers.
It’s not that we aren’t fans of CAES, it’s that we aren’t fans of promises that cannot be achieved and rhetoric that is disconnected from reality, which is most of what we’ve seen from CAES.
😉
If your developer was planning on using a depleted gas well, I’d be interested in seeing his cost assessment – since the infrastructure is largely built out and the only cost becomes the turbine and the adiabatic thermal storage… your investor might be tossing the thermal storage and suffering only 10-20% efficiency cycles so as to reduce the installation cost down to the cost of a turbine – in which case it’s possible that he might be able to project a sale price that is $0.04% as long as his projected purchase price is $0.00 or less… I’m not saying it’s impossible.
I’m saying that if you want to do CAES at a reasonable efficiency you have to include the thermal storage, and that’s going to cost a lot. But years ago I put forward the prospect of using an exhausted natural gas well as a means of escaping quite a bit of the installation costs… and in the end that prospect was not included in our analysis.
I’m glad someone else is pursuing it… I hope it works, but I’m HIGHLY skeptical of $0.04/kWh.
😉
As for the plants that are in operation today… it’s basically impossible to work the numbers. There’s far too little transparency, there was significant government support both for the Alabama facility and the German facility, the build dates were so long ago that comparing material and labor costs is difficult, etc… That was a long dark and frustrating road – attempting to come up with modern equivalences of costs… and in the end we didn’t trust the numbers enough to include them anyway (they were worse than what we published).
Thanks very much for this. It looks like this has a good chance of going forward, and I’ll definitely keep you posted on the results.