Pumping compressed air underground so it can be extracted later to generate electricity could prove one of the most effective ways in the short term for Ontario to add vast amounts of renewable energy to the power system, industry experts say.

So-called compressed-air energy storage, or CAES, has been around for more than 20 years and while only two facilities have ever been built – a 110-megawatt plant in Alabama and a 290-megawatt plant in Germany – officials from New York, California, Texas and a number of other U.S. states are beginning to seriously explore the potential. Iowa has already taken the leap.

The basic concept is that cheap, surplus electricity available overnight is used to compress air and inject it into underground reservoirs, like a salt cavern or depleted gas field. When power is needed during the day and can fetch a higher price on the market, the air is released, exposed to heat and put through an expansion turbine that generates electricity.

"It's beginning to capture people's imagination," says Mark Tinkler, an energy consultant with Emerging Energy Options and former manager of distributed energy technologies at Ontario Power Generation.

Five years ago, Tinkler did a study for OPG on the economics of using CAES and at the time he concluded it didn't make sense. Looking back, he says, enough has changed in the world to revisit the idea.

"My personal feeling is that the time is right to do another assessment."

The reason? In a word, wind.

The wind blows intermittently, so unlike a coal-fired power plant that can dispatch electricity when we need it, a wind farm often generates electricity when we don't need it (or it fails to when we do). Energy storage can level the playing field between renewables and fossil fuels, allowing us to capture wind energy whenever it blows and dispatch the power as demand dictates – much like a coal plant operates today.

It turns out the wind blows best at night, when there's little or no demand for it. Wind-farm operators will often shed the energy or sell it for practically nothing to other utilities.

"It comes down to what the value of electricity is at night," says Tinkler. "Five years ago we didn't have any wind. Now, it's a completely different equation."

Geologically, Ontario is well equipped to embrace CAES – particularly southwestern Ontario. It's often forgotten the region was once the hub of oil and gas exploration in North America and was home to the world's first commercial oil well.

More than 50,000 wells have been drilled in Ontario over the past 150 years and slightly more than 2,000 still produce today. Union Gas and Enbridge Gas Distribution already use depleted gas fields in southwestern Ontario to store natural gas for the heating season. In fact, the Sarnia-Lambton region accounts for 60 per cent of Canada's natural gas storage capacity.

Andrew Hewitt, manager of the petroleum resources centre in Ontario's Ministry of Natural Resources, says the region is also rich in wind resources. He's currently studying the CAES option, having decided several months ago the opportunity was ripe for consideration, particularly as the province moves to shut down its coal plants.

"The compressed-air component doesn't have to be in the same area as a wind farm, it just has to be hooked into the same region of the province," says Hewitt, who hopes to brief the minister on his findings once his research is complete.

"The oil and gas industry has been doing this kind of storage for years. You're using the same technology and just substituting it (natural gas) with air."

The problem is, engineers from power utilities know little about geology and underground technologies. Likewise, engineers from the oil and gas sector are not as knowledgeable about the above-ground machinery that generates electricity.

"You've got to bring teams of these people together to make compressed-air storage happen," says Robert Schainker, a senior technical executive and CAES expert at the Palo Alto, Calif.-based Electric Power Research Institute.

Schainker says it's worth the effort if the geological conditions are right and the goal is bulk energy storage, such as a CAES facility that can store 200 megawatts for 10 hours or more – the equivalent of powering two million 100-watt light bulbs or 400,000 dishwashers for half a day.

True, a number of advanced battery-storage technologies are becoming economical for much smaller applications – for example, one megawatt for one to three hours of storage.

These technologies include zinc-bromide, sodium-sulphur, lithium-ion and vanadium flow battery chemistries. But at much larger scales batteries are simply too expensive.

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CAES, on the other hand, isn't economical on a small scale since the bulk of capital costs relates to the compressors and other turbo-machinery. The underground storage costs are the same whether you've got a small or large reservoir.

Adding an additional hour of storage to a CAES project will only cost $1 (U.S.) or $2 per kilowatt-hour, compared with $350 to $500 per kilowatt-hour of additional battery storage, says Schainker.

Still, there are a few wild cards that could influence the future cost of compressed-air storage. The current generation of CAES facilities still require fuel, typically natural gas, to heat the air before it enters the expansion turbine. Generally, a CAES plant consumes a third less natural gas for every kilowatt-hour it generates, compared with a simple-cycle natural gas or "peakier" plant.

Tinkler says when Ontario Power Generation studied the economics of CAES, the cost of natural gas was $3 per thousand cubic feet. At the time, "we were looking at a $5 break-even point," he says.

"As the price of natural gas goes up, compressed-air storage looks better and better."

Today, natural gas is above $5 per thousand cubic feet. The National Energy Board is projecting it could go as high as $9 over the winter and the U.S. Energy Information Administration is projecting it will hit $6.25 in 2009. As recently as this summer it was higher than $13.

Another factor that would make CAES even more attractive is carbon pricing. Both Canada and the United States plan to introduce a continental cap-and-trade system for carbon emissions. CAES, by increasing our use of wind energy and reducing our consumption of natural gas, would become more economical over time by lowering carbon dioxide emissions in the province.

"You should redo your studies," says Schainker, referring to OPG's initial study in 2003. "CO2 costs will be a big one."

The fact that a CAES facility, like wind farms, can also be built in two or three years also makes it attractive when compared with building a nuclear facility, which, because of more rigorous regulatory requirements, can take 10 years to plan and build.

And the technology continues to mature, Schainker adds, pointing to next-generation designs that can take the waste heat that results from compressing the air and use it in place of natural gas to reheat the air during the electricity generation process. No facility has ever been built around this design, but it's only a matter of time.

"There would be no fuel used whatsoever, no CO2 emissions," he says.

"On paper, it looks very attractive. We're working on it."

Andrew Hewitt at the natural resources ministry says making it happen in Ontario would necessarily require the participation of OPG. He says wind developers in the region could get together and build a facility to share, or a single operator of a large wind farm may decide to pursue such a project alone.

"It doesn't have to be the big utilities," he says. "Commercializing it would depend simply on who wants to get into that business."