Hydrostor Secures $200 Million in Funding from Canada Growth Fund, Goldman Sachs, and CPP

Hydrostor, a developer of energy storage solutions from Toronto, has successfully raised $200 million in funding from the Canada Growth Fund, Goldman Sachs, and the Canada Pension Plan Investment Board to advance projects set for Australia, California, and Eastern Ontario.

This new capital, structured as convertible debt, marks the second significant investment by Goldman Sachs and CPP in Hydrostor, with the inclusion of the Canada Growth Fund—Canada’s initiative supporting green projects alongside private investment.

For several years, Hydrostor has aimed to reach the construction phase for projects exceeding US$2 billion that utilize its Advanced Compressed Air Energy Storage technology. However, progress has been slower than expected. This technology aims to promote the use of renewable energy by mitigating the unpredictability of generation through energy storage that can be fed into grids during periods without sunlight or wind.

The financing includes US$150 million in convertible notes from the consortium. Additionally, the Canada Growth Fund is providing a further US$50 million loan facility to cover some expenses of a proposed 500 megawatt/4,000 megawatt-hour project near Kingston known as the Quinte Energy Storage Centre, in partnership with the Mohawks of the Bay of Quinte.

Hydrostor is on track to make a final investment decision in the third quarter of this year regarding a 200 MW/1,600 MWh storage project in Broken Hill, New South Wales, Australia, estimated to cost approximately US$640 million. Upon completion in late 2027 or early 2028, this venture will be capable of delivering energy for up to eight hours when fully charged.

The company is currently finalizing contracts for construction and major equipment. Once these are settled, lenders will review them before releasing the debt for the project, said Curtis VanWalleghem, Hydrostor’s CEO, in an interview conducted from Melbourne.

Additionally, Hydrostor is moving forward with a US$1.5 billion storage initiative in Kern County, California. The company has secured supply agreements for approximately half of the capacity of the 500 MW/2,000 MWh project and is in ongoing discussions for the remainder, according to Mr. VanWalleghem.

Hydrostor’s system operates by injecting compressed air into a deep underground cavern, which drives water up to a surface reservoir. When electricity is required, the water is released back into the cavern, forcing the air out and activating turbines to produce power.

This system can store energy for extended durations compared to batteries and can operate on excess or off-peak grid power, as well as renewable energy sources.

The shift in political dynamics in Washington following Donald Trump’s election has introduced unpredictability into green subsidy initiatives in the U.S. Earlier in January, the Willow Rock project in California received conditional approval for a loan guarantee of up to US$1.76 billion from the U.S. Department of Energy.

The company is also relying on tax credits provided under former President Joe Biden’s Inflation Reduction Act, which the Trump administration has since placed under review.

Mr. VanWalleghem indicated that the loan guarantee represents a legal commitment, and he is optimistic about its support through the review process in Washington. Meanwhile, Hydrostor is investigating whether existing tax credits will remain applicable if policies change, considering the significant expenditures already committed to the project.

“With all of this, there’s considerable uncertainty given the new administration, which complicates investment decisions,” he commented. Another concern is inflation, as tariffs and other factors may drive up construction costs in the United States.

The political uncertainty in the U.S. underscores the company’s efforts to explore potential storage projects in other regions globally, including Canada, Australia, and the U.K., he added.