Stock Commentary

The CBK hydro complex is not for 'baseload' power

Merkado Barkada
The CBK hydro complex is not for 'baseload' power

Yesterday, I wrote about Citicore Renewable Energy [CREC 2.69 unch; 83% avgVol] and its interest in the CBK hydro complex with 798 MW of generational capacity. In my MB BOTTOM-LINE, I spoke about the value of hydro due to its ability to perform as a battery, and because it is a renewable energy source that is able to provide “baseload” power to the grid. As /u/PHValueInvestor correctly pointed out [link], though, the CBK hydro complex is a pumped storage facility, which means that it is not a baseload power supply. The ability of CBK to operate as a battery – to “spend” electricity to pump water uphill when electricity is cheap only to generate it later when the price is higher – is still valid, but this is not a baseload source of electricity like what the continual flow of water from a large river would supply.

MB bottom-line: Technically speaking, pumped storage facilities are net wasters of electricity. It takes more electricity to pump the water up than that water generates passing over the turbines when it comes back down. But while they’re wasteful in absolute terms, they’re often great ways to “save” some electricity for later during periods of oversupply, and that is often a profitable endeavor since the price of electricity during periods of oversupply is quite low. So, when the sun is shining and it's very windy and all the old coal power plants are online, the grid is filled with cheap electricity and CBK can buy 100 units of cheap electricity (say at P10/unit) to push the water up a hill. Then, when it’s dark and not windy and maybe one or two of the coal power plants are offline and people super need to run aircon, CBK can convert all that potential energy to electricity by releasing the water, flowing it over the turbines, and then selling 80 units of (say at P18/unit) electricity at premium rates. That’s a fictional example with fictional rates, but it demonstrates the fundamentals of the business model for pumped storage. Thank you to /u/PHValueInvestor for the info on CBK!


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