Hydrostor, a Toronto-based company specializing in long-duration energy storage, is set to begin construction on its first commercial energy storage facilities, driven by a pressing need for renewable energy solutions following a series of power outages in Broken Hill, Australia. These outages, exacerbated by storms last October, highlighted the vulnerabilities in the regional power infrastructure and spurred Hydrostor's expansion of a significant backup power deal, valued at U.S.$660 million.
The global energy storage sector is expected to see a 40% increase in capacity over the next decade as part of the broader movement to decarbonize fossil-fuel reliant electrical grids. Cleantech investor Tom Rand emphasizes that addressing climate change and increasing renewable energy adoption cannot be achieved without advanced energy storage solutions like those Hydrostor is developing.
Hydrostor's journey to this pivotal point has been a 15-year endeavor, characterized by extensive R&D, pilot projects, and perseverance in attracting investment. CEO Curtis VanWalleghem notes that financing such projects has been challenging, yet the company has recently secured U.S.$2 billion in funding, including a transformative deal with Goldman Sachs, to launch its first commercial-scale projects in Australia and California, anticipating annual cash flows of roughly U.S.$150 million from utility clients.
However, scaling climate technology, especially in Canada, has inherent difficulties. According to a study by MaRS, hard-tech entrepreneurs often struggle to secure funding, particularly during the critical early phases of development, which require substantial capital and have lengthy timelines—factors that are not favorable in the fast-paced investment landscape dominated by software. Hydrostor’s success story illustrates how innovative and export-oriented climate technologies can emerge from Canada, given sufficient capital investment.
The concept behind Hydrostor's technology originates from an advanced air compression system developed by inventor Cameron Lewis. This system allows for renewable power storage and timely dispatch, optimizing energy management within utilities. Hydrostor's facilities will utilize large man-made caverns connected to holding ponds to serve as energy batteries, where water acts as the storage medium. This innovative approach avoids reliance on critical minerals and can be implemented in diverse geological contexts.
Following the initial conceptualization, the team, including VanWalleghem, navigated the challenging landscape of securing funding from family, friends, and cleantech investors. Years of pitching to venture capitalists ultimately led to significant investments, enabling the company to construct demonstration plants, which attracted further investors, including U.S.$250 million from Goldman Sachs and U.S.$25 million from the Canada Pension Plan Investment Board.
With construction of plants in California and Australia commencing, the Broken Hill facility is poised to enhance backup electricity supply while reducing dependency on diesel generators. Hydrostor has also been awarded a U.S.$1.76 billion Department of Energy loan guarantee for a second facility in California. With plans for 15 additional projects on the horizon, the company aims to penetrate the Canadian market after establishing its foothold internationally.
As Hydrostor continues to grow, it serves as a beacon for hard-tech entrepreneurs facing similar challenges, demonstrating that aligning business viability, investor returns, technological potential, and climate benefits can unlock vast opportunities in the clean tech sector. The company's vision extends far beyond its current projects, showcasing the infinite possibilities for innovation in addressing climate change.
