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Global finance giant Goldman Sachs is a huge believer, investing in the company as part of its initiative to spend US$150 billion in clean-tech and renewable energy ventures

WATER + AIR + ROCK = ENERGY STORAGE SOLVED?Zongzhe Trevor Cai/The Globe and Mail

Curtis VanWalleghem was in charge of business planning at Canada’s largest nuclear plant when he came across the technology that would change the course of his career. The year was 2010. During budget discussions for Bruce Power, on the eastern shore of Lake Huron, the maintenance team warned VanWalleghem that costs were surging to new heights. At the time, the Ontario Liberals’ contentious Green Energy and Green Economy Act had been enacted to bolster the development of renewable energy sources to eventually replace fossil fuels like coal, which then accounted for 8.3% of the province’s electrical generation. To accommodate the variable output of Ontario’s wind farms, Bruce was essentially being dialled down and then wound back up again to ensure there was enough baseload electricity to keep the province’s lights on.

It was costly and impractical, and certainly not what nuclear reactors were built for. In addition, every time the facility was powered down, revenue dwindled. Energy storage, in some form, stood out as the logical solution. So VanWalleghem and his team went in search of options. First, they considered pumped hydro, which involves building two reservoirs at different elevations, then managing the flow of water between them to drive turbines. It was a proven technology, but it could be impractical—for one thing, it required vast swaths of land, and securing it could pit developers against residents.

Then, a junior member of VanWalleghem’s staff told him about an inventor in Toronto named Cameron Lewis who was developing a technique called advanced compressed-air energy storage—something about storing compressed air in underwater balloons. It was too early-stage to be of use at Bruce Power, but not long after meeting Lewis, VanWalleghem became so sold on the idea that he signed on as CEO.

More than a decade later, Lewis’s technology—since modified to store compressed air in deep underground caverns—is on the cusp of playing a key role in an accelerated adoption of renewable energy as the world confronts the climate crisis. Early this year, Hydrostor Inc. landed a US$250-million investment from one of the world’s top investors, Goldman Sachs Asset Management, which oversees more than $2 trillion. The financial giant’s involvement could help fuel a building boom of Hydrostor facilities around the world.

Goldman’s timing sure looks good. If Canada and the rest of the world have any hope of achieving the emissions reduction targets set out in the Paris Agreement and staving off catastrophic climate change, we need to be generating two-thirds of global energy from renewables like wind, solar and geothermal by 2035, the International Energy Agency (IEA) says. (The overall goal is net zero by 2050 in order to limit the rise in global temperatures to between 1.5 and two degrees Celcius from pre-industrial levels.) The IEA expects renewable electricity generation to surge 60% from 2020 levels, to more than 4,800 gigawatts, in the next four years alone. That equals the total current capacity of fossil fuels and nuclear power combined. Renewables will make up 95% of the increase in worldwide electricity capacity through 2026, with solar providing more than half that.

For that to actually happen, we need massive amounts of energy storage since, as the saying goes, the wind doesn’t always gust, and the sun doesn’t always shine. That means renewables can’t provide the baseload power electrical grids require, leaving many utilities to rely on fossil fuel–fired power to keep their systems stable. Despite ample sun and wind in Canada, non-hydro renewable energy made up just 7.4% of the grid in 2019, according to Natural Resources Canada.

The IEA projects the world needs to expand capacity by 56% to reach just 270 gigawatts in four years, and there are a whole bunch of technologies in the mix. “You’ve got compressed-air energy storage, thermal storage, pumped hydro,” says Dan Woynillowicz, principal of Polaris Strategy + Insight, a climate and energy policy consultancy in Victoria. “It’s all going to depend on the cost, market structure, where they’re being utilized—which leads me to believe there’s not going to be one that prevails.”

Investors are piling in all over the place: Over the first three quarters of 2021, storage companies raised US$5.5 billion in venture capital across 59 deals, according to the Financial Times, compared to US$1.2 billion in all of 2020 over 91 deals. Much of that money flowed to lithium-ion batteries, which are expected to account for most of the growth. (Tesla, GE and Siemens are major players in the space.) But they have limitations. They require lithium, cobalt and various rare-earth minerals that must be mined—and a significant chunk of global supply is controlled by Chinese state–owned companies, a major risk as East-West tensions simmer. Operationally, batteries have relatively quick cycle times, meaning they work most efficiently for four hours or less.

That means we need to develop other ways to reach storage scale in a hurry—and Goldman and other investors think Hydrostor has landed on a unique one. One reason for their optimism is that its storage facilities can largely be built using off-the-shelf components and can hoard power for days, not hours, and in larger quantities than batteries can. Plus, a Hydro-stor facility occupies a relatively small footprint compared to pumped hydro, meaning it’s much easier to find places to put them. “You need less than 5% of the space and water, and you can build it virtually anywhere there’s competent bedrock,” says VanWalleghem. “You can go to where the grid needs storage a lot better than pumped hydro can.”

Hydrostor has already built a couple of demonstration plants (including one on the Toronto Island that’s now being dismantled, having served its purpose), and it’s set to break ground on three large-scale projects with hundreds of megawatts of capacity. It’s taken a lot of patient capital from an unusual collection of backers to get the company to the point where it’s set to scale up as global economies seek new ways to decarbonize their power grids.


Off-peak or surplus energy is used to run a compressor and create hot air. The heat is siphoned off and the air stored in a cavern. Then the air is forced to the surface with water, recombined with the stored heat, and used to run a turbine, generating electricityHandout

Hydrostor’s beauty is its relative simplicity. Lewis describes the system as a giant piston. It works by pumping compressed air into a cavern as deep as 600 metres underground. The rush of air pushes water up to a reservoir at the surface. When the power is needed, the water is released back into the cavern, sending the air out and driving turbines that generate power. The system comes with two advantages: The energy can be stored over a period of days rather than hours, as is the case with batteries. It can also run on either excess or off-peak power from the grid or from renewable sources, eliminating the need to burn fossil fuels for its compressors.

Hydrostor’s facilities are built from repurposed energy processing equipment, and assembling one requires the same skills—which means the expertise already exists here in Canada. The gear it uses for the storage process is mostly repurposed from other industries, mainly gas plants and other oil-field equipment. Underground air storage in itself isn’t a brand new concept, either—the natural gas industry, for example, has stored fuel in depleted reservoirs and caverns for decades. And the company says its gear can operate for as long as half a century. If a facility needs to be decommissioned, the compressors and pipes can be removed, and the rocks that were dug out of the shaft can simply be dumped back in.

The facilities are also highly adaptable, says Lewis, because they have three distinct parts. If a utility requires more storage time—say, three or four days—Hydrostor can make the underground cavern bigger. If it requires a large, quick input of solar energy, it’ll install a larger compressor. If the customer needs to discharge power slowly over a long period, Hydrostor can install a smaller turbine. “From my perspective,” says Lewis, “we’ve made a product that is so wildly flexible, it’s easily interchangeable to match whatever they come up with for their needs in the market.”

Off-peak or surplus energy is used to run a compressor and create hot air. The heat is siphoned off and the air stored in a cavern. Then the air is forced to the surface with water, recombined with the stored heat, and used to run a turbine, generating electricityHandout

Lewis recalls his first meeting with VanWalleghem as serendipitous. Lewis had cut his teeth in the oil-field service industry in Alberta, and he’d been seeking ways to commercialize his invention while enrolled at the MaRS tech incubator in Toronto. His adviser there was Tom Rand, the co-founder of ArcTern Ventures, which has been investing in clean tech since 2012. After seeing Lewis’s hand-drawn sketch of the storage system in 2009, Rand took a few days to mull it over before deciding ideas like Lewis’s would one day be key to the mass adoption of renewable energy. He became Hydrostor’s first angel investor. “There wasn’t a market for Hydrostor back then,” says Rand, “but without big long-duration storage, you can’t solve the climate problem. It’s taken 10 years, but the market is here, and it turns out it was a good bet.”

When it came to the business itself, Lewis saw himself as the technical guy, preferring to work behind the scenes. He had no desire to be the face of the company. MaRS had advanced Lewis a grant to hire a CEO so he could concentrate on product development. “This is where the universe and the hand of God came in,” he says.

Meanwhile, at Bruce Power, an analyst associate told VanWalleghem about a guy in Toronto who’d filed a patent for a new way to do compressed air—a technology the associate thought could help solve Bruce’s problem. “It looked pretty interesting,” says VanWalleghem. “We sleuthed around and found Cam’s email address.”

VanWalleghem’s email inviting Lewis to discuss the technology over lunch landed just moments after the inventor had won the MaRS grant. Lewis told VanWalleghem he was surprised MaRS had reached out so quickly with a CEO candidate. Not only had MaRS not contacted him, VanWalleghem replied, but he didn’t even know what MaRS was. The pair hit it off over lunch, and VanWalleghem became a convert. “Cam’s concept was viable and compelling,” he says. “So I decided to take the leap of faith and join.”

Maybe more than the tech itself, what makes Hydrostor remarkable is its roster of strange-bedfellow investors: the outspoken green-capitalism evangelist Rand and oil-patch financier Rafi Tahmazian of Calgary-based Canoe Financial. (For more on Tahmazian’s more traditional energy investments, see page 16.) While they hold wildly different world views on decarbonization, they both agree on the potential for Hydrostor’s technology to become a lynchpin in the transition to more climate-friendly power sources. So much so that they’ve stayed with the company during a lengthy development period in which it has yet to generate significant revenue. All along, Rand and VanWalleghem have kept putting their own money into the venture. “For 11 years, every time we brought on a new investor, they’d say, ‘Curt, Tom—you guys come in and put some more money on the table with us,’” says VanWalleghem. “So we would have to keep doubling down and showing our continued commitment to the business.”

It may be about to pay off, as the company gets set to break ground on three projects in Australia and California worth a total of $2.5 billion.


Hydrostor attracted its first big investor, Calgary-based Lorem Partners, led by Curtis Bartlett and Ron Miller (both Hydrostor directors), in 2016. Bartlett and Miller had made their fortune in the oil patch, backing, building and selling off over a dozen oil and gas producers. Around 2010, they began to study the renewables sector and made an investment in a U.S. hydroelectric company. Five years later, Bartlett sat through pitches by several startups connected to MaRS and came away impressed by Hydrostor. At first, the valuation seemed a bit rich. But a year later, with renewable energy taking off within the utility sector, long-term storage was clearly the missing piece. Hydro- stor looked to have an elegant solution. “What they were doing was taking proven stuff and putting it together in a new way. There is no black box,” says Bartlett. “Utility customers are hard enough. If you’re trying to sell them a black box on top of it, like, good luck.”

Hydrostor’s 1.75-megawatt facility in Goderich, Ont., has been in service since 2019, making it the world’s first commercially contracted advanced compressed-air energy storage facilityHandout

It was Lorem that persuaded Canoe Financial to get in on Hydrostor in 2016. Tahmazian is Canoe’s senior portfolio manager and a vocal defender of the oil industry. He has little patience for anyone espousing the notion that renewables alone can play the role of base power provider to a world that still relies heavily on fossil fuels. Nonetheless, his firm began a search for alternative energy opportunities around the middle of the last decade, when the oil-price crash caused a lengthy malaise in the patch. It landed on Hydrostor back when the company was worth just $12 million. “I thought, Yeah, it’s small, but it will have a real impact in the green movement,” Tahmazian says. “This is not greenwashing my funds. It is exposing my clients to this and feeling good at the end of the day that we’re trying to do something materially relevant.”

In 2020, Paris-based fund manager and infrastructure developer Meridiam signed on as a partner, agreeing to help fund a proposed project in California using Hydrostor’s technology. Since then, the company has benefited from Ottawa’s strategy to lift the Canadian clean-tech sector into an exporting power as global demand for climate-friendly products and services grows. In April 2021, the company scored $4 million from Natural Resources Canada’s Energy Innovation Program and Sustainable Development Technology Canada. Four months later, it won another $10 million from the investment arm of BDC Capital.

Then along came Goldman, which calls its deal with Hydrostor the largest-ever investment in long-duration energy storage. It’s part of the New York–based finance giant’s target to lend and invest US$150 billion in clean-tech and renewable energy ventures around the world. Goldman executives, led by partner Charlie Gailliot, head of energy transition private equity investing, spent about a year digging into the company as part of its due diligence process. Hydrostor’s tech, Gailliot said in an email, “will play an important role in the world’s transition to renewable power.” Three of Hydrostor’s six board members are now Goldman representatives. Based on the size of its investment, that gives some indication of the private company’s valuation—in the neighbourhood of US$500 million.

Hydrostor’s 1.75-megawatt facility in Goderich, Ont., has been in service since 2019, making it the world’s first commercially contracted advanced compressed-air energy storage facilityHandout

The funding, in the form of preferred equity, will help advance Hydrostor’s three main projects, including two $1-billion facilities in California, which has called for 100% carbon-free power by 2045. The 500-megawatt instalment northeast of Los Angeles will store electricity for grids operated by L.A.’s Department of Water and Power and California Independent System Operator. When it’s completed, it will allow solar and wind farms to generate power to the grid around the clock by providing up to eight hours of electricity at full capacity. The second project is planned for Morro Bay, on the coast between San Francisco and L.A., where it would provide up to 400 megawatts of capacity to the local grid.

In Australia, the $500-million Broken Hill Energy Storage Centre would help eliminate major new investments in power lines in New South Wales and wean the region off its dependence on exhaust-belching diesel-powered generators. Located at a decommissioned mine, the facility is being developed with an Australian partner, the advisory firm Energy Estate. In 2020, Transgrid, the state’s transmission network service provider, selected the 200-megawatt project as the preferred option in a regulatory study for transmission investment.

The three projects are in different stages of development, but they’ve all established interconnection with the power grids they plan to serve, confirmed all rights-of-way, and completed preliminary geology and feasibility studies. Hydrostor plans to make a final decision on at least one of them within a year. The plan is to get some or all of the three projects to fruition by 2025 or 2026.

Meanwhile, the location for a new project in Ontario—on top of an existing 1.75-megawatt facility in Goderich, Ont.—is now under consideration.


Rand, for one, has a lot riding on Hydrostor: One-third of his total net worth is tied up in the company. He says Goldman Sachs’s investment shows the power storage business isn’t just a climate play but a financial one. “It doesn’t matter your position on climate. This transition is coming,” says Rand. “Giant hedge funds—I don’t think they give two shits about climate. They’re placing massive bets on low-carbon technologies because I think everyone suddenly realizes the transition is inevitable. Whether it happens fast enough to solve the climate problem is another question.”

Tahmazian agrees—this isn’t just “pipe dreams and pixie dust and fairy tales,” he says. Hydrostor has the potential to make money for investors. Renewable energy, he says “is just not an industry that is mature enough to see a result that’s positive without some very material fixes, one of them being storage. It was just blatantly obvious to us.” That’s why Canoe has hung on as the years have marched on.

Now, the heightened focus on climate solutions—and demands from retail and institutional investors alike for opportunities that offer both environmental and financial gains—has put Hydrostor in a position to move to the next level: building large-scale storage projects and, down the road, a possible initial public offering. VanWalleghem is convinced that once the first plant is up and running, the attraction of the technology will become clear to other utilities as they add renewables to their grids. “Having these first three get through construction—that’s really the next big milestone for us,” he says. “It will add a lot of value for our investors like Goldman Sachs and, in parallel with that, we should be picking up tens of additional plants and getting them contracted. That will form the basis for a very disruptive global business.”

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