As the cost of renewable energy continues to decline and intermittent clean power sources such as wind and solar gain ever an ever larger foothold in the global energy mix, the ability to store energy that can be quickly dispatched when needed has become as important as the development of renewables themselves.
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Robust storage options could allow for greater integration of intermittent renewables, as they facilitate flexible capacity-building that relies far less on coal and gas-fired plants for baseload generation, meaning energy storage is a key step in the journey to wean the world off its fossil fuel addiction.
But cracking the energy storage conundrum is no easy feat. Advanced flow and lithium-ion batteries with storage capability hold great promise, but costs are high and technical aspects are complex as these technologies develop. Pumped-storage hydroelectricity – or ‘pumped hydro’ – is currently the world’s highest-capacity and most efficient energy storage method, but this option, which uses off-peak electricity to pump water from a lower-elevation reservoir to a higher one and then releases the water through turbines during high-demand hours, is limited by the geographical and infrastructure requirements involved.
US-based start-up Quidnet Energy is hoping to fill a gap in the market with an underground pumped hydro concept. The company, co-founded by energy entrepreneur Aaron Mandell and former Saudi Aramco petroleum engineer Howard Schmidt, is currently using rock formations in abandoned oil and gas wells to store pressurised water, which can later be run through a turbine to feed electricity back into the grid.
Quidnet has its first field demonstration plant up-and-running in Erath County, Texas, which has produced good results indicating that the concept is technically workable, and building a commercial-scale demonstration plant in 2017 is the next step. Further down the line, the company intends to drill its own reservoirs separate from the oil and gas sector’s leftover wells, and even integrate solar generation to create baseload solar power plants.
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By GlobalDataWe spoke to Mandell to get a better idea of Quidnet Energy’s origins, financing, methods and ambitions for the future.
Chris Lo: Could you start by giving me some background on when and how Quidnet Energy was first conceived?
Aaron Mandell: We started the company back in 2012. I was introduced to Howard [Schmidt, co-founder] by some scientists at Halliburton, who had been talking to Howard about his idea and saw it had merit. Howard and I got together and decided to form a company and see if we could begin sharpening our pencil on what it would take to prove out the technology and really dig into the economics. We spent the better part of the first year on paper, modelling it out and running the numbers. We ended up partnering with the folks at Halliburton to help us really understand what it would take to develop this type of storage, and whether our understanding about the performance of certain geologies lined up with what Halliburton had seen in the past, and it did.
So that was 2013, and in 2014 we started working on our demonstration project down in Texas.
CL: Could you walk me through how your process works and how it differs from pumped hydro?
AM: The whole goal with the course we’re taking is basically to mimic the efficiency of pumped hydro, which is between 70% and 75% round-trip efficiency. The aim with underground pumped hydro is to put all that [pumped hydro] infrastructure below the ground and take advantage of rock formations that exist naturally that can store water under pressure.
We went into a natural gas shale formation that was drilled but never produced very much natural gas, and we pumped water in under pressure, and demonstrated that the water had an extremely low leak-off rate and would stay there under pressure for very long periods of time, far in excess of what you would need just for a daily storage system. In fact, we were anticipating a leak-off rate that was on the order of 1% of the reservoir volume per day, and we ended up with a leak-off rate that’s more in the order of 1% per week.
CL: What is it about depleted oil wells in particular that makes them so suitable for this kind of process?
AM: We actually think this type of storage can be done in more places than not. To find impermeable rock formations is actually quite easy; you just need to be able to drill down, get to that depth and then open up the rock using hydraulic stimulation. We’re starting out with oil and gas wells for two reasons. The most important reason is to reduce the exploration risk. If we know what the geology looks like because there have already been holes drilled and resources produced, it makes it a lot easier to get started, especially for a small company like Quidnet.
The second reason is we’re taking advantage of existing infrastructure. So for the demonstration plant we built in Texas, we didn’t have to drill our own well; we went into an existing 2,000ft gas well that was already there. All we had to do was connect up the generator and the turbine. So that just makes it a lot easier to get started.
Ultimately as we scale-up, we will be drilling purpose-built storage wells, so we won’t always leverage existing oil and gas wells. We probably will continue to lean heavily on the data that exists around geologies in certain parts of the world. But one of the important things that we learned in Texas is that oil and gas wells are not constructed in a way that’s optimal for energy storage.
The limiting factor that we uncovered in Texas was the flow rate. We could actually store enough water in the reservoir to get the energy storage capacity that we wanted, but we couldn’t move enough fluid in and out of the reservoir to get to the power generation output that we wanted. That’s why, over time, we will move away from small diameter, around 4in-6in oil and gas wells to much larger diameters, more in the range of 10in-20in in diameter.
CL: You’ve said that you’re aiming to reduce costs by up to a factor of ten compared with lithium-ion batteries – how can Quidnet’s process undercut these on cost by such a large margin?
AM: It depends on exactly what battery technologies you look at, whether you’re talking about flow batteries or lithium-ion from folks like Tesla. But both of those technologies right now are coming in at a range of about $400-$500 per kilowatt-hour, and that’s the cost of the storage aspect of the battery system. Our goal at Quidnet is to be under $50 per kilowatt-hour for the entire system.
The reason we can do that is that it’s relatively inexpensive to drill a 2,000ft hole, and all of the equipment for converting pressurised water to electrical energy is existing. It’s the same equipment that’s used in the pumped hydro industry. So you don’t have any of the materials that go into battery cells, you don’t have the manufacturing costs, and you don’t have all the balance of plant requirements that make batteries expensive.
CL: What do you think it takes to persuade an energy company or utility to buy into a new concept like this?
AM: It’s a bit of a chicken-and-egg scenario, right? Because large power companies and developers aren’t going to take a risk on a new technology until it’s proven. So I think, at the end of the day, our business model is going to be a bit of a hybrid. It’s going to be developing the initial systems ourselves, because we’re the ones who are experts in the technology and we’re willing to take the risk. Once we get to a certain minimum commercial scale, it will be licencing and selling the technology to other developers and operators.
That being said, we do view Quidnet as an energy company, not as an energy storage technology. So our ultimate goal is to build power plants. If you have an approach for storing renewable electricity very inexpensively, you can actually become a developer of power plants to replace the fossil industry. It’s very easy for us to access low-cost solar equipment, and at the end of the day, what’s going to prevent the solar industry from growing further is the ability to provide baseload solar power or dispatchable solar power.
What we need is solar at night or when the sun isn’t shining. So that’s what we see as Quidnet’s development advantage – we can go out there and build this type of storage capacity, slap on solar, and now we have the least-cost generation, combined with the ability to dispatch solar energy on demand.
CL: Quidnet has received venture funding and corporate partnership, but you’ve also had investment from the charitable PRIME Coalition. What’s been your experience of attracting philanthropic investment, and do you think we’ll start seeing more of it in the energy technology space?
AM: Yes, I do. We were very fortunate to partner with the PRIME Coalition, and I think the model they’re pursuing is an extremely valuable one because there just isn’t the type of risk equity that companies like Quidnet need available from the venture capital community right now. The venture community is structured around a ten-year fund and within a ten-year fund you have very near-term liquidation requirements, and right now where the clean energy industry is, you need to be able to look long-term, towards longer development cycles.
So I think for the most part, the type of capital that early-stage companies need is going to come from some pretty alternative sources. The PRIME Coalition is a great example of leveraging programme-related investments to put capital to work long-term. So yeah, I think what PRIME is doing has been pretty critical and Quidnet’s going to need to tap into more of that to scale.
CL: How far along are you in the development cycle, and do you have a window in mind for a commercial launch?
AM: We’re still pretty early, so we’re completing this first field demonstration in Texas and we’re now working on a commercial demonstration, which will be in the range of 5MW-10MW, and we are aiming to have that commercial demonstration up-and-running next year. That will serve as our reference plant and once we have a reference plant built, that’s when we can start doing commercial deals where we’re either licensing the technology to developers or we’re going out and financing our own projects.
