FAQ: Energy Storage for the Smart Grid

Adding digital intelligence to the power grid is getting all the attention right now from Congress, investors and entrepreneurs, but a next-generation smart grid without energy storage is like a computer without a hard drive: severely limited. Energy stored throughout the grid can provide dispatchable power to address peak power needs, decreasing the use of expensive plants that utilities power up as a last resort when demand spikes, making the network less volatile. Energy storage will also be crucial for making the most of variable renewable energy sources (the sun shines and the wind blows only at certain times) once they’re connected to the grid. In the way that computers and the infrastructure of the Internet have built up around storage as a key component, so will the power grid eventually rely on energy storage technology as a pivotal piece.

But until recently, energy storage has been largely ignored — overshadowed by clean power generation or information technology for the smart grid. Mohr Davidow Ventures partner Marianne Wu said at an energy storage conference at UC Berkeley last week that over the past few years it’s been very hard to find entrepreneurs with long careers and innovative ideas in grid-focused energy storage. The small number of battery startups in the U.S. have generally been focusing on the sexier market of electric and hybrid vehicles.

All that seems to be changing, though, as more attention shifts to the importance of remaking the power grid. The stimulus package is allocating billions specifically for energy storage and advanced battery technology for the power grid, among other applications, in addition to the billions set aside for adding digital intelligence to the grid that will help incorporate these storage technologies. On Tuesday morning, GE announced that it’s building a battery factory in New York state in order to produce energy storage devices for the power grid (as well as heavy-haul trains) and is looking for stimulus funding.

Private investors are also seeing the new opportunities: While venture capital investments for the first quarter of this year dropped across the board, energy storage technology for vehicles and the grid received $114 million, making it one of the only bright spots, according to Ernst & Young and Dow Jones. That was more than double the$50 million venture capitalists invested in the quarter a year prior. If funding news coming out of the current quarter is an indicator of things to come, the energy storage boom will continue. Last week grid energy storage company Deeya Energy announced it has nabbed \$30 million.

Battery companies that have been developing devices for vehicles are also increasingly eyeing applications for grid power. A123Systems, the lithium-ion darling backed by GE, installed its first Hybrid Ancillary Power Unit at a power plant owned by AES in Southern California last November. Around the same time lithium titanate battery maker Altairnano (s ALTI) announced that it is supplying a 1 MW battery storage system for a major transmission region. And ultracapacitor company EEStor was reported to be in “serious talks” with potential solar and wind energy partners to help boost grid capacity by providing its devices for utility-scale electricity storage.

But beyond advanced batteries and ultracapacitors there’s a variety of technologies being tested for the power grid. These nine are among the most promising:

Compressed Air: Compressed air is a decades-old technology which takes excess energy from a power plant or renewable energy and uses it to run air compressors, which pump air into an underground cave or container where it’s stored under pressure. When the air is released, it powers a turbine, creating electricity. Utilities like PG&E are starting to investigate this technology because it is one of the lowest-cost and simplest energy storage technologies.

But pumping compressed air underground has some environmental and safety concerns, so the process for getting regulators to approve these projects takes a long time. There’s only a handful of compressed air energy storage projects in the world, including one in Alabama and one in Germany. Entrepreneurial ventures in this space are rare, but a joint venture called Energy Storage and Power, which is a partnership between Public Service Enterprise Group, owner of New Jersey’s largest utility, and inventor Michael Nakhamkin, emerged last year.

Pumped Hydro: Pumped hydro storage is the most widespread energy storage technology used in the world, according to the Energy Storage Association. There are about 90 GW of pumped storage in operation, which equals about 3 percent of worldwide generation capacity. The system works by pumping water from a lower reservoir to a higher reservoir and then letting the water move downhill to produce electricity when needed. Traditional iterations of the technology are ideal for populations that live close to high altitude terrain, like Switzerland, where pumped hydro has been used for a century.

Ultracapacitors: A new generation of ultracapacitors is emerging, aiming to seize the future of the auto industry — can they revolutionize the power grid, too? Capacitors have traditionally been used to produce quick bursts of speed and to deliver fast charge times, rather than for endurance, but some of the newer ultracapacitors are getting better in this area. EEStor is one of the more well-known of the group and, as we’ve already pointed out, it has been reported to be talking to renewable energy providers. Graphene Energy, an Austin-based ultracapacitor developer that emerged in January and is seed funded by Quercus Trust, works with the strongest material ever tested — a one-atom thick sheet of graphite — and is looking to apply its device to the power grid.

Flywheels: Flywheels are large discs that spin in a vacuum and are sometimes used as backup power for an uninterrupted power supply (UPS), which are emergency power systems that turn on after a power outage before a generator kicks in. Flywheels have the benefit of needing little upkeep over a 20-year-plus lifetime and don’t contain toxic chemicals the way some batteries do. The amount of power delivered to the grid depends on how fast the flywheel spins. But flywheels have faced some hurdles in reaching mainstream commercialization including technology development, difficulty finding the right market and competition with batteries. (For example, flywheel maker Beacon Power recently said it is delaying the expansion of a small commercial project that it had been planning to build out to 5 MW.)

Sodium Sulfur (NAS) Batteries: Sodium Sulfur or “NAS” batteries use simple ingredients — liquid sulfur and salt — and have been used on Japan’s power grid for years. According to the Electric Storage Association, there are over 190 sites and 270 MW of stored energy from NAS batteries in Japan. In GE’s battery factory announcement this morning, GE CEO Jeffrey Immelt said GE will be building sodium-based batteries at its plant and said that the company has over 30 patents in the space.

Flow Batteries: Similar to fuel cells, flow batteries are a decades-old technology that converts chemical energy into electricity. Oftentimes the electrolyte is stored in large external tanks, and the rate of how the power is stored and delivered can be managed. Another advantage of a flow battery is that it can be recharged quickly. The tech is older, but some entrepreneurs see newer opportunities, and Deeya Energy is an example of a new flow battery startup that recently received funding.

Lithium-ion Batteries: Much of the advancement in batteries (for the grid and for electric vehicles) is being done with lithium-based batteries like the ones made by A123Systems and Altairnano. Compared with the incumbent technology, lead acid batteries, lithium allows for faster charging, lighter weight, and higher energy density and is poised to be the moneymaker of the world battery materials market in the coming years.

Lead Acid Batteries: Lead acid batteries are the oldest, most mature form, of batteries for energy storage, and the technology is relatively cheap and widely available. But the chemistry has its barriers, including lower energy density and heavier weight. Some entrepreneurs are trying to breathe new life into lead acid battery technology, including Axion Power, a Quercus Trust-backed startup working to blend ultracapacitor tech with old-fashioned lead-acid batteries for a lead 2.0 device.

Fuel Cells: Fuel cells produce electricity through an electrochemical conversion, and can be quickly recharged by updating a fuel cell device with a new solution. Fuel cells have long been thought of as the holy grail of energy storage technology — for consumer electronics, vehicles and the power grid — but have so far failed to make it to mainstream commercialization. They may fare better in the power grid market, since the need for rock bottom prices in the gadget and car markets has been one of their biggest barriers. Bloom Energy is a high-profile startup working on a large-scale fuel cell that could help stabilize the power grid and promises to have its device ready within a year or two.