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A123 Systems Gets on the Grid

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Massachusetts battery developer A123 Systems may be best known for its work on lithium-ion batteries for hybrid and electric vehicles, but the company is also working on energy storage systems for electric utilities. This week, the startup announced the installation of its first Hybrid Ancillary Power Unit at a power plant owned by AES (s AES) in Southern California (hat tip Green Car Congress).

But the company could be facing some tough competition from Nevada’s Altair Nanotechnologies (s ALTI), another lithium-ion battery developer, which is also making moves in the utility energy storage field. And Altair is also working with AES, which made a $3 million investment in Altair in 2007.

This is some of the first news from A123 since the firm filed for an initial public offering in August. The company’s list of big-name investors include General Electric (s GE), Procter & Gamble (s PG), Motorola (s MOT) and Qualcomm (s QCOM).

A123 filed to raise up $175 million in its IPO, but has yet to set the number of shares or a price range for them. And with these shaky economic times, it could be long wait until we actually see the company hit the public market.

According to A123’s filings, the installation of the Hybrid Ancillary Power Unit, or H-APU, actually took place last month. The company said it has a contract to provide AES with multiple H-APUs through 2009 for use in grid stabilization applications in facilities around the world, including a 16-megawatt grid service system in South America. Financial terms of the deal were not disclosed.

The systems are designed to offset sudden power shortages caused by generator or transmission outages and to help regulate frequency fluctuations in the grid that are caused by changes in supply and demand throughout the day. The company said the new H-APU system can serve two functions — it can absorb energy from the grid when the frequency or voltage is too high and inject that energy back onto the grid when the frequency or voltage is too low, and it can also provide backup power by storing energy until it’s needed by the grid in the event of a power plant failure.

A123 said this first unit, which it said can respond in milliseconds to supply and demand changes, can deliver 2 MW of power at close to 90 percent efficiency.

There are a number of competing technologies in the race to improve aging grid infrastructures in the U.S. and around the world, including flywheel technology from Beacon Power (s BCON), and high temperature superconductor wires from American Superconductor (s AMSC). Last week, Beacon said it would delay the expansion of a commercial project, citing the volatile economic market.

Even Google (s GOOG) is getting into the grid game. The search giant recently joined the Demand Response and Smart Grid Coalition, and in September, teamed up with GE on an energy policy and technology partnership that the companies said would include pushing for a smarter electricity grid.