LPO Announces Conditional Commitment for Long Duration Compressed Air Energy Storage to Enable a Diverse and Reliable Generation Mix

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As part of the Biden-Harris Administration’s Investing in America agenda, the U.S. Department of Energy’s (DOE) Loan Programs Office (LPO) today announced a conditional commitment for a loan guarantee of up to $1.76 billion (including up to $279 million in capitalized interest) to GEM A-CAES, LLC for the Willow Rock Energy Storage Center, an advanced compressed air energy storage system (A-CAES) in Eastern Kern County, California. If finalized, Willow Rock is expected to provide 4000 MWh /500 MW of long duration energy storage (LDES) for the southern California grid, helping to reduce energy costs, improve grid reliability, and expand the dispatchability of renewable energy into the grid while supporting reliability during peak demand periods. 

Typically, compressed air energy storage (CAES) uses surplus, low-cost electrical energy (e.g. from renewable power generation) and stores it safely as compressed air, often in underground caverns. Whenever the energy is needed, that stored energy can generate electricity for the grid by passing the air through a turbine. For example, the energy can be used to reduce grid stress and energy costs during peak demand periods, improve grid stability, or increase the deliverability of curtailed and constrained generation.  As a form of LDES, Willow Rock will be able to dispatch stored energy at full power for over eight-hour-plus periods and is limited in MWh scale only by the cavern size. 

Today’s announcement will help ensure the Biden-Harris Administration’s clean energy and manufacturing jobs boom continues to benefit communities across the nation for generations to come. Willow Rock is expected to create up to 700 peak construction jobs and 40 full-time operations jobs. The skills needed for Willow Rock’s operations jobs are similar to those required in the oil and gas industry, historically an economic bedrock of Kern County—underscoring the Administration’s deep commitment to ensuring no one and no community is left behind as the nation transitions to a cleaner energy future. GEM A-CAES, LLC is a subsidiary of Hydrostor USA Holdings, Inc., a subsidiary of Hydrostor Inc. of Canada.

CAES systems use readily available equipment and are not heavily dependent on critical materials like their battery counterparts. A-CAES facilities generally have lower capital and operating costs, and have long operating lifetimes of 50+ years with minimal degradation.  Additionally, they can deliver critical grid-supporting ancillary services. 

With conventional CAES less than 50% of energy is typically recoverable, impeding its wide-scale adoption. The advanced CAES technology at Willow Rock improves on conventional CAES by overcoming two main challenges that have limited its overall round-trip efficiency. First, because thermal energy from compression is released as waste in traditional CAES, fuel combustion is necessary to reintroduce the heat necessary to keep generation equipment at optimal working temperatures during discharge. By pairing a proprietary thermal storage system with this process, Willow Rock captures, stores, and reuses heat from the compression cycle. Second, traditional CAES generates power at a nonconstant rate depending on the remaining underground air pressure. To overcome this limitation, GEM A-CAES uses water from an above-ground reservoir to maintain constant pressure in the cavern—that said, the facility will actually be a net producer of fresh water, as water condensed during the compression process will be captured and reused. This innovation also allows A-CAES systems to be installed in a greater variety of underground conditions, whereas CAES has historically required the durability of salt caverns to overcome stress cycles from varying pressure. With an estimated 80% of U.S. geology suitable for A-CAES caverns, GEM A-CAES’s technology has the potential to be deployed widely.

LPO borrowers are required to develop and ultimately implement a comprehensive Community Benefits Plan (CBP). CBPs ensure borrowers meaningfully engage with community and labor groups to create good-paying jobs and improve the well-being of the local community and workers. In its CBP, GEM A-CAES has committed to partnering with the local economic development agency to create educational pathways to employment opportunities. GEM A-CAES is also investing in community-identified priorities, including funding a fully equipped Urban Search and Rescue unit for the county as well as improvements to local health care services.

Today’s announcement reflects DOE’s efforts to invest in disadvantaged communities that are marginalized by underinvestment and overburdened by pollution. Willow Rock is adjacent to three disadvantaged communities, as identified by the Climate and Economic Justice Screening Tool.  By enabling deployment of more low-cost renewables and providing inter-day energy storage, Willow Rock helps to decrease energy burdens and improve system reliability for the region.

The loan guarantee would be offered through LPO’s Title 17 Clean Energy Financing Program, which includes financing opportunities for innovative energy and supply chain projects and projects that reinvest in existing energy infrastructure. The project will benefit from the 48E investment tax credit, available to developers of new clean electricity or energy storage facilities.

While this conditional commitment indicates DOE’s intent to provide a loan guarantee for finance the project, DOE and the company must satisfy certain technical, legal, environmental, and financial conditions before the Department enters into definitive financing documents and funds the loan.