October
1, 2007
by David Marcus,
General Compression
A recent study commissioned by the Clean Air Task Force and Mechanology,
LLC evaluated the economic feasibility of CAES-wind generation. The study's
results indicate that compressing air with wind power can deliver measurable
economic value and make renewable wind power more cost-effective and
grid-friendly.
At the
same time, consumers, business leaders and policymakers alike harbor fears of
potential negative consequences to adopting new energy sources—such as devalued conventional businesses,
job losses, and skyrocketing prices across the country.
In order
to successfully satisfy the very real demand for global clean energy supplies,
and the fears that accompany such a critical need, we must find clean solutions
with consequences which are not only tolerable, but actually desirable: driving
economic expansion, initiating new job creation, and delivering price
stability.
For
renewables such as wind to demonstrate these positive outcomes and become truly
mainstream, they must first surmount two critical obstacles: reliability and
affordability.
Making Renewable Wind Energy Affordable
Clearly many clean energy solutions are needed in order to satisfy global
demand. One increasingly compelling option is compressed air energy storage
(CAES)—enhanced wind
power, or CAES-wind. In a compressed air system, air is forced into a
pressurized storage vessel during periods of low demand and then released
through an expander to generate power during periods of peak demand. A CAES-wind project is one in which wind
power is used to compress the air, thus relieving wind power of its
intermittency and unpredictability.
A recent
study commissioned by the Clean Air Task Force and Mechanology, LLC (the parent
company of General Compression) evaluated the economic feasibility of CAES-wind
generation. The study's results indicate that compressing air with wind power
can deliver measurable economic value and make renewable wind power more
cost-effective and grid-friendly.
To draw
these conclusions, the study considered whether a system using wind energy to
compress air, store it during periods of low demand, and then release it to
generate power (with external heat added) during times of peak demand, adds
incremental economic value above that delivered by a conventional wind plant.
The study
contemplated how the delivered value might vary across different plant
configurations—peaking, intermediate, and base load—as well as under different wind regimes and
power markets in various regions of the United States, and its authors used the
Dispatchable Wind Power System (DWPS) being developed by General Compression as
their subject.
According
to the final report, an incremental investment in an intermediate configuration
CAES-wind system can have an internal rate of return of 25 percent (including
the federal production tax credit [
By
shifting wind energy production from periods of low demand to periods of high
demand when prices are higher, the study authors found that a CAES-wind project
can increase the effective selling price of its energy output, accounting for
45 percent of the additional value created. In addition, injecting
high-efficiency steam into the expander process can more than double net
project power output. This accounts for the remaining 55 percent of the
additional value.
While the
intermediate configuration was consistently the most profitable, the study
final report indicates that baseload, intermediate, and peaking configurations
all delivered value similar to or greater than that of a conventional wind
plant. According to the researchers, some differences can be anticipated across
regions of the country due to varying fuel mixes and prices (for the added
heat), market heat rates, and years-of-need, but these variations do not
materially alter the study's final results.
Future
studies currently in progress will report on the predicted reliability of
CAES-wind systems.
Renewable Energy on Demand Means Renewable Energy in Demand
In brief, the present study indicated that CAES-wind makes economic sense. By
using compressed air energy storage with wind, producers can realize lower
capital costs and greater grid acceptance (with correspondingly higher energy
prices and fees) compared to traditional wind technology. But the real question
is: will these rewards be enough to enable wind power to maintain and even
accelerate its grid penetration?
To put it
plainly, can CAES-wind technologies—or other renewable energy resources for that matter—compete successfully
against conventional energy sources, such as fossil or nuclear power?
General
Compression believes the answer is a resounding, YES.'
The
company is replacing the generators in the wind turbine nacelle with
purpose-designed compressors which convert wind's kinetic energy directly into
compressed air potential energy. The high-pressure air is then run through a
pipe down the tower to an underground network of steel pipes which interconnect
with multiple wind turbines. The pipe network alone can act as a storage vessel
to provide between 4 and 12 hours of energy storage, but if the storage network
can also encompass a salt dome, depleted gas field, aquifer, limestone cavern,
or other geologic feature, energy storage capacity can be increased to more
than a month.
In
addition, General Compression's DWPS, or simply ‘Dispatchable Wind,' reduces capital costs as
compressors replace the more costly generators in the turbine and electric motors on the ground.
Dispatchable
Wind also makes use of external heat sources mentioned in the CAES-wind study,
such as waste heat from fossil-fired generators or industrial processes, to
double the productivity of the expanders. The result is a system that can
reliably deliver wind power as either a peak or baseload resource, at prices
which can compete favorably with fossil and nuclear power.
General
Compression plans to have its first full-scale Dispatchable Wind prototypes
erected in early 2010, and to engage in serial production in 2011.
Delivering on the Promise of Reliable, Affordable Renewable Energy
By increasing the reliability and cost-competitiveness of clean, renewable wind
power, compressed air energy storage promises to optimize the productivity of
this important renewable energy resource and bring wind power from the fringe
to the forefront.
General
Compression is staking its corporate future on Dispatchable Wind. But in a very
real sense, we are all staking our individual futures—and our families' futures—on the rapid and
widespread adoption of
clean energy solutions for electricity generation, transportation, agriculture,
and industrial production.
While the ‘stick' of international, national, and state
regulations is not to be discounted, the ‘carrot' of economic rewards remains the critical lever in renewables' bid to
truly transform the power sector. Those renewables which prove to be not only
environmentally preferable, but economically and operationally superior to
conventional energy sources, will quickly out compete conventional sources for
new energy development projects, both here in the U.S. and around the world.
Worldwide
appetite for new clean energy sources, already huge, will be sharpened by successful
demonstration of the first major renewable technologies to prove both reliable
and economically rewarding. If the renewables sector can succeed in that
challenge, it will finally be poised to begin satisfying the global demand for
clean energy solutions.
David Marcus, CEO and director of General Compression, has been a wind
energy investor since 2002. He is the Managing Partner of Chestnut Capital,
which is a partner, investor, or shareholder in several wind energy developers,
including Ridgeline, Midwest Renewable, NedPower, Greenlight, Windworks,
Foresight, and the Clean Power Income Fund. David is a Magna Cum Laude graduate
of Princeton University, and the founder and former CEO of APEX Property
Exchange, a financial services firm he founded in 1989 and sold to JPMorgan in
2002.