Summary:

LG Chem has won its first deal in the utility market — it will supply lithium-ion battery packs for a Southern California Edison energy storage project.

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LG Chem has found its first American utility customer. Southern California Edison said Wednesday it plans to use the Korean tech giant’s lithium-ion battery packs for an energy storage pilot project for homes and small businesses.

The project, to run from the third quarter of 2011 until the end of 2012, will give Edison data about how stored solar electricity can complement its responsibility and interest in managing the supply and demand for renewable energy, particularly through the use of smart meters and other communications gear and software to manage its transmission and distribution networks.

LG Chem has put together a team of suppliers for the project. The company will use its battery packs while its kin within the LG conglomerate, LG Electronics, will supply inverters and related gear for solar electric systems. LS Industrial Systems will provide battery chargers. LG Chem Power, a subsidiary of LG Chem, will put all these equipment together for the project.

LG Chem didn’t provide many details about the project, except that the batteries will provide 10-kilowatt-hour of storage at each chosen test site. That amount of storage can reduce a home or business’s reliance on electricity from the grid by as much as 4 kilowatts at a time, particularly during times of peak demand.

If you want more details about this pilot project, you will have to wait. SCE spokesman Charlie Coleman told us the utility just signed a contract with LG Chem to carry out the program, and hasn’t mapped out the specifics of the project. LG Chem is the sole battery and other equipment supplier for the project, Coleman said. Both companies declined to provide the project’s cost.

The project won’t be the first energy storage trials for SCE. The utility received $4 million from the federal government to install 8 megawatts of lithium-ion batteries to manage its wind energy generation.

LG Chem’s interest in storage isn’t surprising. Many battery makers that traditionally serve the electronics and portable charger markets are salivating after the emerging renewable energy storage and electric car markets. LG Chem is supplying lithium-ion batteries to power General Motors’ Chevy Volt and hybrid cars from Ford. LG Chem said it plans to use its automotive-grade battery packs for SCE’s storage project.

Earlier this year, the battery maker said it would build its first battery cell factory — a$303 million project — in Michigan. Other competitors in the automotive and energy storage fields include A123Systems, Xtreme Power and ZBB Energy.

Energy storage is shaping up to be a big market because of a growing amount of solar and wind energy coming online in the U.S However, Interest in this space vary. Some technology developers believe home and businesse owners will want to store any solar electricity they generate but don’t need right away. Utilities are investigating how storage might help them manage the flow of solar and wind energy from giant solar power plants and from homes and businesses, especially given how the volumes of solar and wind generation can vary significantly throughout the day and night. The electric grid operators see storage as a way to supply the short bursts of energy needed to keep the grid humming at an optimal frequency, which is necessary to ensure the grid can handle any energy demand.

Policy makers also see renewable energy storage as a means to reduce the need to build more power plants that run on fossil fuel. California recently passed a bill that will require its Public Utilities Commission to determine whether the state should require public and private utilities to invest in energy storage.

California is giving out several million dollars to companies such as SunPower and SolarCity to test how energy storage can be a good fit for their customers. SunPower is receiving about $1.86 million to try out three types of energy storage technologies – two batteries and one ice energy. SolarCity plans to use the $1.77 million grant to pair lithium-ion batteries from Tesla Motors with the solar electric systems it sells to homes and businesses.

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