Overview of the Tulia CAES Bulk Electric Storage Project
April 2013
Agenda
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I. What is CAES?II. Why Tulia and Economic Development III. Need for Storage and our Progress IV. Subsurface TechnologyV. MilestonesVI. Questions?
Tulia I Rapid Response Storage and Generation Facility
What is CAES?Commercially proven in two facilities, Compressed Air Energy Storage (CAES)
is the most flexible technology for the bulk storage of electricity
Two commercial‐scale units have been operating reliably for two decades.
Two commercial‐scale units have been operating reliably for two decades.
Can optimize sales and purchases of energy and ancillary services
Can optimize sales and purchases of energy and ancillary services
Compressed air is released , mixed with a small amount of natural gas, and used to fire a turbines for generation of electricity when it is most needed and when prices are higher.
Compressed air is released , mixed with a small amount of natural gas, and used to fire a turbines for generation of electricity when it is most needed and when prices are higher.
Can store and generate simultaneously
Can store and generate simultaneously
Electricity from grid or behind meter source
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The Right Place in Texas
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• Geology
• Wind
• Water
• Technology
• Electric Transmission
• Gas Pipeline
• Potential Revenue
• Regulation is Right
TULIA CAES PLANT
CAES 7-mile double-circuit 345 kV line
345 kV CREZ loop from Nazareth to Silverton
Silverton Collection Station
Amarillo South toSwisher County
SPP 230 kV Line
Proposed Interconnection of Tulia 1 CAES plant to ERCOT 345 kV CREZ system.
PowerSouth Energy Cooperative
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CavernWellhead
CAES Unit
Tulia Economic Development
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Facility Staffing Plan
Description NumberPlant Manager 1Operations Manager 1Shift Operators 12Leaching Field Operators 3Maintenance Manager 1Mechanical Technicians 8I&E Technicians 6Maintenance Assistants 2Groundskeeper 1Janitor 1Warehouse 1Accounting/Payroll 3Security 4Administrative 1Total Staff 45
The Facility is to be staffed 24 hours a day 7 days a week. Operating staff is to work in 12-hour shifts on a rotating schedule. The management and maintenance staff is to work a normal weekday schedule and work on nights or weekends, as required. Major maintenance crews will be employed as required.
The Need For Bulk Energy Storage
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• The electric grid operates entirely on demand – generation must meet demand at all times– Grid operators balance supply and demand to maintain the stability of the system
• Responsive generating units are dispatched to meet peaks in demand and ramped down when load tapers off• Fast response units, however, can be expensive to operate, leading to spikes in power prices when demand is high
– Efficient bulk energy storage can be used to help maintain grid stability at attractive cost• Stored power can be dispatched extremely quickly to meet peak demand• Lower fuel costs than conventional thermal quick response units
Greater Penetration of Renewable Energy Resources + Grid Stability• Power landscape is shifting toward a greater reliance on renewable forms of power generation (e.g. wind)
– While renewable resources are attractive for their environmental characteristics, they often prove to be significantly less reliable sources of power than conventional thermal resources• Power is generated intermittently (i.e. whenever the wind blows) and output can be highly variable• Accordingly, the growth in renewable energy resources creates a more volatile grid system• As wind resources lend to a “peak-ier” system, bulk energy storage can be used to efficiently regulate the
balance between electric supply and demand
– Further, renewable resources may generate power at suboptimal times• In West Texas, for example, the wind blows primarily during the nighttime hours when demand is low• Bulk energy storage can be used to “time-shift” excess power, storing it and making it available during
periods of greater demand
Summary of the Tulia CAES Project
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• Chamisa Energy, LLC (“Chamisa”) is developing a 270MW Compressed Air Energy Storage (“CAES”) facility (“Tulia I”) in Swisher County, Texas
• Chamisa owns the land on which the Tulia I site will be located, having acquired the plot following a careful analysis of the surrounding region’s geology, the site’s physical proximity to wind generating resources and the ability to efficiently interconnect to the ERCOT grid
• Tulia I will employ proven CAES technology to capitalize on a compelling market opportunity, as the high-wind-penetrated yet overall resource constrained ERCOT market provides an exceptional platform to capture the full range of economics available to CAES technology, including:
– Transforming wind , or another renewable, into a fully dispatchable generating resource– Serving any of base, intermediate and peak load– Providing Ancillary Services– Arbitraging on-peak/off-peak energy prices
• The project is expected to generate 25-year unlevered returns of 17-30% based on third-party power market consultant analysis
• The Tulia I team has achieved significant development milestones to date and has a credible development plan for the construction of the facility
Bedded Salt CavernsGeophysical Well Logs and Stratigraphy Confirms Salt Formations
14 11 6
SWISHER HALE
SouthB’Interpretations based
on core descriptions
NorthB
Top of San Andres
Formation
Chamisa anticipates locating the caverns in the Upper San Andreas Formation, which is comprised mainly of salt
Subsurface Development
• Chamisa engaged RESPEC Consulting & Services to perform extensive geomechanical modeling and analysis in order to inform the selection of an appropriate number of caverns, their depth and design– Thermal finite element model used to predict temperatures in the rock surrounding the caverns as a function of time– Temporal rock temperatures and mechanical loading used in thermomechanical finite element model to predict cavern
stress• Key modeling assumptions:
– Casing seat at 2,284 feet– Cavern roof at 2,324 feet (roof salt thickness of 50 feet)– Cavern floor at 2,424 feet– Maximum radius of 150 feet – Cavern usable air storage volume of 733,500 bbls (each)– Cavern fully cycled over a 48-hour period
• In consultation with RESPEC, Lonquist and Glorieta Geoscience, Chamisa has assumed a conservative cavern plan– Caverns will be limited to a maximum pressure swing of 0.21 psi/ft at the casing seat (~480 psi), ranging from 0.64-
0.85 psi/ft– This will allow for 6.6 mmlbs of working gas and 18 hours of storage (assuming a withdrawal rate of 101 lb/s)
• Based on the simulations analyzed by RESPEC, the caverns are projected to experience minimal tensile stresses with high factors of safety in the surrounding siltstone – The cavern plan will be refined following the drilling and analysis of the onsite test core– Ultimately, Chamisa’s cavern plan may prove to be overly conservative, which would allow for the development of
fewer caverns while maintaining the same total amount of storage and operating parameters
Cavern Location and Design
Source: Chamisa Energy, LLC; RESPEC; Lonquist & Co. LLC
Subsurface Development (Cont.)Cavern Location and Design (Cont.)
Source: Chamisa Energy, LLC; RESPEC; Lonquist & Co. LLC
Cavern Design Close-Up of Cavern Area
CAES Cycle Working Gas CAES Cycles – Casing Seat Pressure
0 50 100 150 200 250 300
2,200
2,250
2,300
2,350
2,400
2,450
2,500
Radius (ft)
Dep
th (ft) Siltstone
Salt
Anhydrite
-10
0
10
20
30
40
50
60
70
80
90
100
110
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
Wor
king
Gas
(%)
Time (days)
0.60
0.65
0.70
0.75
0.80
0.85
0.90
0.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00
Pres
sure
Gra
dien
t at C
asin
g Se
at (p
si/ft
)
Time (days)
0.61 to 0.85 psi/ft
0.64 to 0.85 psi/ft
0.63 to 0.85 psi/ft
Subsurface Development (Cont.)Cavern Location and Design (Cont.)
Source: Chamisa Energy, LLC; RESPEC; Lonquist & Co. LLC
Potential for Tensile Fracture Siltstone Factors of Safety (25 years)
Potential for Salt Dilation Cavern Closure
70
80
90
100
110
120
‐2,000
‐1,500
‐1,000
‐500
0
500
364.00 364.25 364.50 364.75 365.00 365.25 365.50 365.75 366.00Tempe
rature (°F)
Stress (p
si)
Days into 1st Year of Cycling
0.64 to 0.85 psi/ft
Maximum Principal StressNormal Stress (Negative of Cavern Pressure)
Cavern Wall Temperature
Note: Tensile Stresses are Positive
Development Milestones Completed
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Chamisa has invested approximately $5-10mm in land acquisition and project development costs to date
Date Milestone
October 2010 Completed Phase I environmental review
July 2011 Acquired TCEQ groundwater protection letter
July 2011 Acquired surface water permit
July 2011 Completed acquisition of site and all mineral rights
December 2011 Completed PILOT agreement negotiations with local governments
March 2012 Acquired TRRC test core drilling permit
March 2012 Received favorable rule change from PUCT for energy storage
April 2012 Acquired TRRC P-5 operators permit
October 2012 Signed ESA with Dresser Rand and Lonquist
November 2012 Engaged SAIC as Independent Engineer / Power Market Consultant
December 2012 Filed air permit with EPA
December 2012 ERCOT began implementation of energy storage rule change
January 2013 Filed air permit with TCEQ
February 2013 Received Class 3 proposal from Dresser Rand
February 2013 Received preliminary geo-mechanical analysis from RESPEC
February 2013 Finalized preliminary cavern design and solution mining plan
March 2013 Received Power Market Consultant report
March 2013 Received Independent Engineer report
March 2013 Received air permit from TCEQ
Key Project Milestones Remaining
Date Milestone
Q2 2013 Issue FEED RFP
Q2 2013 File Rule 97 and Rule 9 permit applications
Q3 2013 Drill & analyze on-site test core
Q3-Q4 2013 Refine cavern design and solution mining plan
Q4 2013 Finalize contract with Dresser Rand, order long-lead time items
Q4 2013 Finalize selection of and negotiate contract with EPC contractor
Q1 2014 Commence well and cavern drilling
Q1 2015 Commence cavern leaching
2016 Construct balance of plant
2016 Construct transmission line and gas pipeline
Q2 2016 Begin installation of Dresser Rand equipment
Q1 2017 Begin conversion of caverns to air service
Q3 2017 Commence operations
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The critical near-term milestone will be the drilling and analysis of the on-site test core
Tulia I Rapid Response Storage and Generation Facility 15
Questions