Santa Fe-based Chamisa Energy Corporation recently announced a request for proposals for up to 250MW of nameplate wind generation resources to be used to provide energy to a 135 MW or larger compressed air energy storage (CAES) facility under development in Swisher County in the Texas panhandle. The proposed CAES facility would compress air and store it in solution-mined underground caverns. To convert the stored potential energy back into electricity, the stored air would be released and mixed with a small amount of natural gas to drive a turbine. The RFP describes CAES as a "bulk electric storage technology used to complement wind energy generation so that wind energy becomes a fully dispatchable resource suitable for peaking, intermediate, baseload or tolling resource."
The energy would be provided to the facility pursuant to a power purchase agreement (PPA). Chamisa invites wind plants located either in the Southwest Power Power (SPP) or the Electric Reliability Council of Texas (ERCOT) to respond. Chamisa will consider proposals that supply wind energy for seven years, but prefers a minimum term of 15 years. The target date for delivering electricity to the Storage Facility is the second quarter of 2014.
Chamisa notes that it is not aware of completed or pending PPAs between WGR and CAES facilities, and thus anticipates that the successful proposal "will be creative in its approach to the RFP." Although the RFP isn't explicit on the point, Chamisa's plan may be to purchase energy from a wind generator or wind generators pursuant to the PPA, store the energy, and then sell the electricity and ancillary services from the facility to a third-party off-taker. If Chamisa can take the bulk of the energy into CAES primarily in off peak hours and then sell the stored energy during on-peak hours, might in theory be able to profit on the arbitrage between the two price points, although past efforts to get grid-scale storage to pencil out on that basis have had limited success. Alternatively, the facility may be able to profit by using the stored energy to provide ancillary services, grid congestion relief, grid stability and support for grid expansion.
In principle, the CAES facility could also be used in a tolling arrangement by which a utility or a seller of wind energy hires the CAES facility for storage, pays a reservation and storage charge to Chamisa, and then dispatches the stored energy at will--in other words, the third-party offtaker could be the same party as the generator delivering the wind energy to the facility (e.g., a utility that is buying wind energy that it wants to shift from off-peak hours to on-peak hours). Under this structure, the party tolling electricity would retain title to the electicity being stored and could arbitrage or otherwise deploy the stored energy into the market as it saw fit. However, a tolling transaction of that type isn't clearly called for by the RFP (although it doesn't appear to be precluded).
Regardless, Chamisa's RFP will be worth monitoring to see whether an independent storage developer can create a workable market structure for its storage assets in order to facilitate financing. The outcome of this effort will be of great interest to developers of solar and wind resources, as well as to developers of pumped storage and other grid-scale storage solutions.
The deadline for written or email questions is March 31, 2011, and proposals are due no later than 5pm Mountain Standard Time on May 16, 2011. If submitted by mail, proposal(s) must be postmarked May 16th. E-mail submission is preferred. You can access Chamisa's RFP by clicking here.