Techno-economic comparison of state-of-the-art compressed air energy storage and pumped hydro storage systems in Aotearoa New Zealand

Abstract

This paper examines the potential use of compressed air energy storage (CAES) as a utility-scale energy storage solution for Aotearoa New Zealand. The country’s strong commitment to renewable energy and the increasing integration of intermittent sources such as wind and solar power necessitate robust energy storage capabilities to ensure grid stability and security. Through techno-economic modelling and sensitivity analysis, CAES clearly shows it can stand competitive against pumped hydro storage (PHS), the dominant form of utility-scale storage. By utilising existing geological formations, such as depleted gas fields in Taranaki, CAES minimises capital costs and surface footprint while avoiding the extensive land inundation and biodiversity impact inherent with hydro reservoirs. Furthermore, CAES technology provides essential ancillary services, including physical grid inertia and frequency stability, which are critical as fossil-fuelled thermal generators are decommissioned. The paper concludes by recommending a dual-track storage strategy. While PHS remains unparalleled for addressing seasonal dry-year risks, CAES should be prioritised for medium-duration (10–100 hour) stabilisation. Deploying modular 300–500 MW CAES facilities near North Island load centres provides grid resilience while reducing reliance on the Inter-Island HVDC link. This integrated approach optimises fiscal responsibility and ecological integrity, offering the most robust pathway toward Aotearoa’s net-zero future.