Goldman Sachs just made a record-setting investment in long-duration energy storage

The banking giant is betting $250M on Canadian startup Hydrostor and its novel underground system to store clean energy for the grid.

Hydrostor's advanced compressed-air energy storage facility in Goderich, Ontario, Canada (Hydrostor)
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An iconoclastic Canadian startup just raised a landmark investment from Goldman Sachs to build massive storage for clean energy.

Hydrostor stores surplus electricity by compressing air into underground caverns. It updates a long-standing technology that never took off for electrical storage. Hydrostor thinks the tweaks it has made will allow underground storage to work in more places — just as grids increasingly need help turning wind and solar production into reliable 24/7 electricity.

Goldman Sachs agreed and invested $250 million from its private equity division. That’s unusual for the long-duration energy storage sector, which typically draws riskier venture-capital investment.

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It is growth capital; it’s not prove the technology’ venture capital,” Hydrostor CEO Curtis VanWalleghem told Canary Media on Monday. We were able to show them how compelling the technology is and how advanced our development projects are.”

This investment exceeds the $240 million that Form Energy raised last year to commercialize its novel iron-air battery technology. That makes Hydrostor’s raise one of the largest corporate investments ever made in a long-duration storage company.

This portends palpable acceleration for a startup that came a long way while spending relatively little money. 

Hydrostor made strategic use of Canadian government grants to develop its early demonstrations. The company got an early commercial project running in Ontario’s wholesale power market in 2019. That one is small, just 2 megawatts/​10 megawatt-hours, but generates around $1 million in annual revenue. Having a megawatt-scale project making money in a power market is a basic achievement that still continues to elude many long-duration storage startups.

Hydrostor put around $5 million into development efforts elsewhere. That work produced three late-stage projects that, if built, would require $2.5 billion of construction capital and generate at least $5 billion of contracted revenue, VanWalleghem said.

Two of those projects are undergoing environmental permitting review in California. One is proposed for the Central Coast, to help cope with the loss of baseload carbon-free power from Diablo Canyon, the nuclear plant slated to close by 2025. The second would go into the Central Valley, near a hot spot for large-scale solar development. The third project is planned for Australia. 

To build these projects, Hydrostor excavates an 8-foot-diameter shaft that goes 2,000 feet deep. Workers descend to hollow out a cavity, which the company then floods. When it’s time to charge,” the aboveground facility compresses air and shoots it below the water barrier. To discharge, it releases the compressed air, which spins a turbine and produces electricity.

(Hydrostor)

These projects are designed for eight hours of discharge at full power capacity. But the technology can provide longer storage durations with a bigger cavern to hold more air.

That kind of duration, at the scale of hundreds of megawatts, puts Hydrostor into contention with a conventional pumped hydro plant, which is by far the leading source of grid-scale energy storage. But pumped hydro requires a site with significant changes in elevation and copious supplies of water. Hydrostor’s concept boasts a dramatically smaller footprint and relatively negligible water needs, making it more geographically versatile.

All we need is reasonably competent bedrock,” VanWalleghem said.

With the influx of cash, Hydrostor aims to double its roughly 25-person staff this year, VanWalleghem said. Crucially, it will also expand development activities to new markets, including Europe and the rest of the U.S. And it will have resources to pursue new developments while bringing its current efforts fully to fruition, which is expected to take four years. 

Hydrostor will also hone 24/7 clean energy offerings for large corporate customers that want to step up their sustainability commitments. Combining wind and solar contracts with a Hydrostor facility could achieve the round-the-clock clean energy goal.

We have a mousetrap that we truly believe is better than other people’s mousetraps,” VanWalleghem said. Where we choose to play and put our money, we expect to win.”

The roster of competitors is increasingly well funded, but leadership of this nascent market is still very much up for grabs.

Julian Spector is senior reporter at Canary Media.