Montem Resources pre-feasibility study confirms Tent Mountain as ‘outstanding’ renewable energy project

Montem Resources (ASX: MR1) has debuted the much-anticipated pre-feasibility study for its Tent Mountain renewable energy complex (TM-REX), which confirms it as an “outstanding” renewable energy project with “compelling economics”.

Tent Mountain is a historical coal mine in Alberta, and Montem identified it as a potential development site for an integrated renewable energy complex that generates and stores energy, and produces green hydrogen to feed local Canadian electricity grids.

The pre-feasibility study looked at leveraging the existing assets at Tent Mountain, including a large water reservoir, which was left behind from previous mining.

As part of the study, engineering, design, cost estimates and project economics for the pumped hydro energy storage (PHES) element using the reservoir were analysed.

According to Montem, PHES is a proven technology that offers “superior” energy storage and “significantly longer asset life” compared to lithium-ion batteries – and is critical to the storage technology mix to enable grid decarbonisation.

The PHES study assumes an 80-year project life with 320MW of installed capacity, and 2,560MWh storage, which would allow for eight hours of continuous energy generation.

However, optimisation work was recommended to evaluate increasing the size of the upper reservoir for a low capital cost of around C$35 million.

This could almost double the energy storage capacity to 4,955MWh – equating to 15 continuous hours of energy.

TM-REX development

The wider TM-REX development concept comprises three primary elements.

As well as the 2,560MWh PHES, Montem aims to establish a 100MW offsite wind farm, and a 100MW green hydrogen electrolyser.

The 100MW green hydrogen electrolyser would be scalable and potentially Alberta’s first large-scale project of its kind.

Meanwhile, the windfarm would be used to recharge the PHES, and power the green hydrogen electrolyser.

A business case analysis has been completed for the green hydrogen electrolyser element of the project, which along with the PHES have the potential to provide “strong returns for shareholders”.

The TM-REX would power 400 homes and abate up to 590,000t a year in carbon dioxide emissions.

Nearby interconnection options for both 500kV and 240kV transmission lined were identified in the pre-feasibility study.

These could connect the PHES at Tent Mountain to the Alberta power grid. As a result, Montem has lodged the relevant applications for connection.

Project economics

Total capital costs were estimated at C$901 million in 2022, which includes a 30% contingency.

However, Montem anticipates steel prices will come off their current highs, and optimisation work will be able to reduce the capital cost to about C$750 million for the PHES project, plus an interconnection cost of C$70 million.

Using two energy price forecasts – base case and net zero, the economics indicate “attractive returns” for both scenarios.

However, the most robust returns are expected to arise from the net zero price.

Meanwhile, two metrics were used to compare the economics of the TM-PHES project to others: $/MW (power output) and $/MWh (energy stored).

Using the C$901 million capital estimate, on a $/MW basis of C$3 million per MW, Montem noted TM-PHES compared favourably other PHES projects globally.

At the $/MWh basis of C$379,000/MWh, the company said this similarly compared favourably.

Important energy infrastructure project

Montem chief executive officer Peter Doyle said the study confirms TM-REX as an important energy infrastructure project.

“Our conviction to explore an alternate development pathway to the coal mine at Tent Mountain is yielding results.”

“We now have a viable alternative investment at Tent Mountain, with the potential for strong returns, and importantly, a social licence to purse this investment.”

Mr Doyle said the proposed project continued to garner support from indigenous and local communities along with the provincial government.

Next steps for TM-PHES

Upcoming work on TM-PHES will involve looking at increasing the upper reservoir storage capacity to 4,955MWh by optimisation work.

“This optimisation work has the potential to create material upside for project returns,” Montem noted.

In advancing the project, additional geotechnical work will be undertaken followed by front-end engineering design activities.

Alberta electricity market

Similar to other electricity grids around the world, Alberta’s is in the process of decarbonising – drawing on more renewables in recent years.

This trend is expected to pick-up with three-quarters of new grid energy sources expected to come from wind and solar.

As a result, Montem says energy storage solutions such as its TM-PHES project will become “increasingly important” to balance electricity supply and maintain grid stability.