Location, Location, Location: Massive Pumped Storage + Solar PV Project Closer to Reality

Valhalla PSH plant location

A proposed 300-MW pumped storage hydropower plant combined with 600-MW solar PV plant is taking shape in Chile. Valhalla, the team behind the Espejo de Terapaca plant said in an interview that it has hired Marathon Capital to help find strategic investors in the project. If the right partners are found, the US $1 billion project could begin construction in early 2017.

It’s the perfect location for a project like this because of the natural landscape. No dams will need to be built and the land will not be disturbed because it is a desert.

“There is a big coastal mountain range very close from the ocean and [the landscape] has natural concavities, said Francisco Torrealba, co-founder of the company. “That is something that you rarely see anywhere else in the world,” he added.

The project will use Francis-type turbines from a European supplier and PV with single-axis tracking to generate baseload power at an extremely competitive price.

“This is most likely going to be one of the cheapest pumped storage plants in the world," said Torrealba referencing the power auction held in Chile in early September where Valhalla bid $65.9 per MWh compared to gas at $69.9, hydro at $76.1, biomass at $85.6 and coal at $89.7.

“We actually came cheaper than hydro plants, cheaper than coal, cheaper than almost all natural gas plants,” he said.

The cost to build a project of this size is “significant,” said Laurie Kelly, CFO at Valhalla. For that reason, the company has recently begun working with Marathon Capital, a 17-year old investment bank and financial advisory firm headquartered in Chicago.

Thiago Alfaia, Director at Marathon Capital leads Latin American initiatives for the bank and is working closely with Valhalla.

“We are very confident that we will be able to raise the required capital,” he said in an interview.

Alfaia said Marathon finds the project intriguing not so much for the technologies in use (solar PV and pumped hydro are fairly commonplace these days) but for the concept and the costs.

“It is probably one of the most competitive baseload renewable energy sources in the world,” said Alfaia, adding “we think this is one of the most interesting renewable energy projects out there.”

Repeatable?

While the company is laser-focused on getting this project built, there are a select few other locations where pumped hydro and solar might make sense. However, Torrealba said environmental permitting for hydropower is very difficult.

“If you think in the states in the East Coast, you have a number of forests and you would generally have to build at least one dam and sometimes two dams so it is very invasive," said Torrealba.

“There is some potential in Peru. Some in Mexico and in theory there is some potential in California [but] as I said, any chance of doing something in California is just too tricky [because of permitting].” 

If all goes according to plan the pumped storage plant should take approximately 3.5 years to build with the PV portion of the project taking approximately 2 years, said the company.  The project is expected to be completed by 2020.

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