The Cleantech Opportunity of the Month: Wind Energy + Compressed Air Energy Storage = High-Value, Dispatchable Power
As I’ve mentioned, I write a monthly piece for the Hedge Connection’s blog “The Edge,” in which I discuss a certain investment opportunity that I believe has merit. Here’s what I propose to offer for April.
Here’s another installment from Hedge Connection contributor Craig Shields, a senior consultant to the cleantech industry, in which he discusses one of the most exciting business opportunities he’s come across recently in his field of engagement. You may recall that Craig finds himself in a unique position to make such a submission: via his website, 2GreenEnergy.com, he reviews many hundreds of business plans annually from cleantech entrepreneurs all around the globe.
He has 7500 subscribers to his newsletter, most of them hard at work in the development of some sort of cleantech concept: perhaps introducing a new invention or a new business model, perhaps a standard implementation of solar, wind, biomass, hydro, or geothermal – or a project in a related field: energy storage, smart grid, or electric transportation.
The following is another in a series of Craig’s submissions in which he presents a summary of one more of his personal favorites; we hope you find it worthwhile.
Wind Farm in the Southern U.S. Will Implement Compressed Air Energy Storage (CAES)
Over the past few years, I’ve come to know a certain top-flight engineering team whose goal is to offer large quantities of dispatchable power from wind. Of course, the very notion requires energy storage, as wind is a variable resource. Here is a brief outline on the subject:
Wind/CAES has far greater value than wind-only. Wind energy generated at night or during possible grid curtailment is stored as compressed air in natural, cavernous, geologic formations such as depleted natural gas wells. During the day, if the wind isn’t blowing, compressed air is released and run through combustion turbines to create electricity. H2 from electrolysis replaces natural gas used in existing CAES plants to heat stored air, making the power production system completely renewable.
Because the capital costs of CAES are so low, the resulting price of electricity is less expensive than the price of electricity from coal plants, natural gas plants, or nuclear plants. This makes wind/CAES an economic as well as an environmental winner.
Technological advances in compression (like supersonic compression), combustion turbine blades, expander efficiency, heat recuperation, and other CAES components will continue to drive costs down and efficiencies up. Other technological advancements are expected to continue with wind turbines, making the future of wind/CAES even brighter.
CAES solves problems, e.g., grid problems caused by intermittent wind, risk of curtailment issues, and dispatchability (less than 10 minutes). The subject isn’t new, but hasn’t been developed very far. Having said that, though there are two plants that have been deployed internationally, and their stories are impressive:
Huntorf, Germany – 290 MW CAES plant
Operating successfully since 1978
31 years of outstanding performance
95% running reliability
McIntosh, Alabama – 110 MW CAES plant
Operating successfully since 1991
18 years of outstanding performance
81% operating efficiency kW in/kW out
97% running reliability
All sites proposed by this company provide Class 4 + winds and ideal access to CAES geologic formations. Texas & Kansas are ranked #1 & #2 in wind resource potential in the United States.
All sites provide access to wastewater resources needed to make H2 from electrolysis, and have transmission lines planned or under construction.
Let’s examine the claim that CAES has simply been “under-developed.” If this is true, exactly why, and what makes us think this will change in the very near future?
• The myth of “cheap” coal; only recently have the externalities become seriously called into question; the industry’s ability to dominate energy policy is rapidly losing ground, even in a Republican-dominated U.S. Senate
• Dreams of low-cost nuclear, which persist primarily in the form of liquid fluoride thorium reactors, but are much further off in terms of time and cost than promoters admit
• Natural gas prices temporarily low, yet we live in a world that increasingly places bans on fracking and becomes increasingly anxious to phase out fossil fuels
• Public concern for climate change increasing as even the common American realizes the lies associated with “denialism”; even uneducated people are no longer impressed with their leaders’ telling them, “I’m not a scientist.”
• Transmission lines for wind farms coming along as the U.S. builds out its grid
• More accurate financial modeling, which had formerly ignored the benefit of ancillary services revenue. E.g., New York’s landmark ruling that providers of services necessary to support the transmission of capacity and energy from generation resources to consumers be fairly compensated: maintaining the reliable operation of the transmission system via regulation and operating reserve, rectifying energy imbalance, and cost-based services of scheduling, system control and dispatch, voltage control and “Black Start”
Research on High Voltage Transmission Suggests Rapid Deployment
• Princeton Environmental Institute Report on CAES, by Samir Succar
• National Renewable Energy Laboratory Study, by Paul Denholm supports Wind/CAES
• Electricity Advisory Council & Electric Power Research Institute Study on Energy Storage
• The Ridge Energy report on Wind/CAES
Excellent Regulatory Support
• American Recovery and Reinvestment Act supports new energy technology including Wind/CAES
• Federal Energy Regulatory Commission support for building transmission lines in the Midwest (EIPC), SPP highway/biway
• Kansas legislature passes the first bill in history supporting CAES development; California has passed a similar bill supporting CAES and Texas has one on the docket
• Investment Tax Credits for wind projects can be traded for cash with the U.S. Department of the Treasury
• ERCOT, MISO, and PJM are developing ancillary services pricing standards. Other RTO’s are planning this as well.
• Waxman Markey bill for Cap and Trade of CO2 is an incentive to develop Wind/CAES
• States’ RPS will increase demand for wind power by 250% by 2015.
Questions?
I suspect there may be, as the presentation above, at the request of the deal principles, contains only oblique references to the financial aspects of the project. I can assure you, however, having seen them, that this enterprise represents a very interesting and attractive opportunity for accredited investors. As always, I’d be happy to entertain any and all questions about the project, or, better, put Hedge Connection readers directly in touch with the developers.
– Craig Shields, craig@2greenenergy.com
