Overview of the TuliaCAES Bulk ElectricStorage ProjectApril 2013
Agenda2I. What is CAES?II. Why Tulia and Economic DevelopmentIII. Need for Storage and our ProgressIV. Subsurface TechnologyV. MilestonesVI. Questions?
Tulia I Rapid Response Storage and Generation FacilityWhat 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 simultaneouslyElectricity from gridor behind meter source3
The Right Place in Texas4• Geology • Wind • Water • Technology • Electric Transmission • Gas Pipeline• Potential Revenue • Regulation is RightTULIA CAES PLANTCAES 7-mile double-circuit 345 kV line345 kV CREZ loop fromNazareth to SilvertonSilvertonCollection StationAmarilloSouth toSwisherCountySPP 230kV LineProposed Interconnection of Tulia 1 CAES plant toERCOT 345 kV CREZ system.
PowerSouth Energy Cooperative5CavernWellheadCAES Unit
Tulia Economic Development6Facility Staffing PlanDescription 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 45The Facility is to be staffed 24 hours a day 7 days a week. Operating staff is to work in 12-hourshifts on a rotating schedule. The management and maintenance staff is to work a normalweekday schedule and work on nights or weekends, as required. Major maintenance crews willbe employed as required.
The Need For Bulk Energy Storage7• 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 unitsGreater 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 besignificantly 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 thebalance 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 duringperiods of greater demand
Summary of the Tulia CAES Project8• 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 acareful analysis of the surrounding region’s geology, the site’s physical proximity to wind generatingresources 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 thehigh-wind-penetrated yet overall resource constrained ERCOT market provides an exceptional platformto 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 powermarket consultant analysis• The Tulia I team has achieved significant development milestones to date and has a credibledevelopment plan for the construction of the facility
Bedded Salt CavernsGeophysical Well Logs and Stratigraphy Confirms Salt Formations14 11 6SWISHER HALESouthB’Interpretations basedon core descriptionsNorthBTop of SanAndresFormationChamisa anticipateslocating the caverns in theUpper San AndreasFormation, which iscomprised mainly of salt
Subsurface Development• Chamisa engaged RESPEC Consulting & Services to perform extensive geomechanical modeling and analysis in orderto 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 cavernstress• 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 withhigh 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 offewer caverns while maintaining the same total amount of storage and operating parametersCavern Location and DesignSource: Chamisa Energy, LLC; RESPEC; Lonquist & Co. LLC
Subsurface Development (Cont.)Cavern Location and Design (Cont.)Source: Chamisa Energy, LLC; RESPEC; Lonquist & Co. LLCCavern Design Close-Up of Cavern AreaCAES Cycle Working Gas CAES Cycles – Casing Seat Pressure0 50 100 150 200 250 3002,2002,2502,3002,3502,4002,4502,500Radius (ft)Depth (ft)SiltstoneSaltAnhydrite-1001020304050607080901001100.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00WorkingGas(%)Time (days)0.600.650.700.750.800.850.900.00 0.20 0.40 0.60 0.80 1.00 1.20 1.40 1.60 1.80 2.00PressureGradientatCasingSeat(psi/ft)Time (days)0.61 to 0.85 psi/ft0.64 to 0.85 psi/ft0.63 to 0.85 psi/ft
Subsurface Development (Cont.)Cavern Location and Design (Cont.)Source: Chamisa Energy, LLC; RESPEC; Lonquist & Co. LLCPotential for Tensile Fracture Siltstone Factors of Safety (25 years)Potential for Salt Dilation Cavern Closure708090100110120‐2,000‐1,500‐1,000‐5000500364.00 364.25 364.50 364.75 365.00 365.25 365.50 365.75 366.00Temperature (°F)Stress (psi)Days into 1st Year of Cycling0.64 to 0.85 psi/ftMaximum Principal StressNormal Stress (Negative of Cavern Pressure)Cavern Wall TemperatureNote: Tensile Stresses are Positive
Development Milestones Completed13Chamisa has investedapproximately $5-10mmin land acquisition andproject developmentcosts to dateDate MilestoneOctober 2010 Completed Phase I environmental reviewJuly 2011 Acquired TCEQ groundwater protection letterJuly 2011 Acquired surface water permitJuly 2011 Completed acquisition of site and all mineral rightsDecember 2011 Completed PILOT agreement negotiations with local governmentsMarch 2012 Acquired TRRC test core drilling permitMarch 2012 Received favorable rule change from PUCT for energy storageApril 2012 Acquired TRRC P-5 operators permitOctober 2012 Signed ESA with Dresser Rand and LonquistNovember 2012 Engaged SAIC as Independent Engineer / Power Market ConsultantDecember 2012 Filed air permit with EPADecember 2012 ERCOT began implementation of energy storage rule changeJanuary 2013 Filed air permit with TCEQFebruary 2013 Received Class 3 proposal from Dresser RandFebruary 2013 Received preliminary geo-mechanical analysis from RESPECFebruary 2013 Finalized preliminary cavern design and solution mining planMarch 2013 Received Power Market Consultant reportMarch 2013 Received Independent Engineer reportMarch 2013 Received air permit from TCEQ
Key Project Milestones RemainingDate MilestoneQ2 2013 Issue FEED RFPQ2 2013 File Rule 97 and Rule 9 permit applicationsQ3 2013 Drill & analyze on-site test coreQ3-Q4 2013 Refine cavern design and solution mining planQ4 2013 Finalize contract with Dresser Rand, order long-lead time itemsQ4 2013 Finalize selection of and negotiate contract with EPC contractorQ1 2014 Commence well and cavern drillingQ1 2015 Commence cavern leaching2016 Construct balance of plant2016 Construct transmission line and gas pipelineQ2 2016 Begin installation of Dresser Rand equipmentQ1 2017 Begin conversion of caverns to air serviceQ3 2017 Commence operations14The critical near-termmilestone will be thedrilling and analysis ofthe on-site test core
Tulia I Rapid Response Storage and Generation Facility 15Questions