Goldman Sachs to pump $250M into compressed-air storage upstart Hydrostor

An affiliate of investment banking giant Goldman Sachs Group Inc. has committed $250 million in equity financing to compressed-air energy storage startup Hydrostor Inc., continuing a fundraising blitz among developers of alternatives to lithium-ion batteries for grid-scale projects.

Toronto-based Hydrostor, which announced the investment Jan. 10, intends to use the funds to support its development and build-out of projects, including 1.1 GW/8.7 GWh of systems planned in California and Australia.

Curtis VanWalleghem, CEO and co-founder of Hydrostor, called the investment "transformational" for the company and its bid to roll out large-scale projects.

"As the world continues transitioning to sustainable and renewable energy sources, the need for utility-scale long-duration energy storage is clear, and Hydrostor's [advanced compressed-air energy storage] solution is well-positioned to become a leading player in this emerging global market," Charlie Gailliot, partner and head of energy transition private equity investing at Goldman Sachs Asset Management, said in a statement.

Goldman Sachs will fund its investment in phases tied to project milestones, according to the companies.

Following two smaller projects in Ontario, Canada, Hydrostor and French financing partner Meridiam Infrastructure Partners SAS proposed in November 2021 an estimated $800 million project in San Luis Obispo County, Calif. Hydrostor plans to break ground on the 400-MW Pecho Energy Storage Center, with eight hours of energy storage, in 2023.

In December 2021, Hydrostor filed a second application with the California Energy Commission for the roughly $1 billion Gem Energy Storage Center in Kern County. The 500-MW project, with at least eight hours of storage, is also expected to start construction in 2023.

Hydrostor President Jon Norman said in a recent interview that the company is in active discussions with retail energy suppliers in California for the output of the projects. State-regulated utilities, community choice aggregators and other retail electric providers must purchase 1,000 MW of long-duration energy storage with at least eight hours of discharge by 2026, the California Public Utilities Commission ruled in June 2021.

The company is also developing a 200-MW project with up to eight hours of energy storage capacity in Australia that is planned to begin construction in late 2022 or early 2023.