Utility-scale Energy Storage "Will Have Its Coming Out Party" This Year

No, not the Castro-type of coming out party, but according to researchers at IDC, utility-scale energy storage will have the it’s-going-to-be-a-big-market type of coming out party this year. IDC points to the allocation of the U.S. smart grid stimulus funds that were focused on energy storage, improvements in technology and pricing for energy storage technology, and the potential for strong U.S. supportive legislation, as strong signals of a soon-to-boom utility-scale energy storage market.

As we pointed out in November just the fact that the Department of Energy awarded $185 million in the form of 16 grants for energy storage projects was very significant to highlight just how important the sector would be in 2010 (here’s five lesser-known energy storage players that won funding). Combined with government funding, interest from utilities like PG&E and Southern California Edison (see utility energy storage projects here) and attention from large battery players like newly public lithium-ion battery maker A123Systems, we share IDC’s bullish sentiments.

IDC says that price and technology improvements will do a lot to boost the market for utility energy storage in 2010. Specifically price and technology improvements in lithium-ion battery technology — like that from A123Systems — will enable the devices to dominate the utility-scale energy storage market for the time being. Over 50 MW of lithium-ion batteries for utility energy storage will be shipped this year, predicts IDC. Flywheels will also play a role in utility-scale energy storage this year by providing utilities with frequency regulation.

Several utilities will break ground on underground compressed-air energy storage this year, says IDC (more on compressed-air energy storage here). Compressed air technology is decades-old and 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. PG&E won $25 million in the smart grid stimulus funds to build and validate an advanced, underground 300 MW compressed-air energy storage plant using a saline porous rock formation located near Bakersfield, Calif. as the storage reservoir.

Beyond government funding, utility interest and technology innovations, IDC says that supportive legislation could also go a long way to boost this market in 2010. IDC predicts that the market will be helped by state and federal attention on “precedents for rate basing,” and “improved terms for rate of return” for energy storage. A year ago a lesser-known bill called “STORAGE” — the Storage Technology of Renewable and Green Energy Act of 2009 (S. 1091) — was introduced and could offer tax credits for energy storage. While that bill seems to have stall, perhaps if storage gets its coming out party this year, there’ll be renewed focus on the bill.

The biggest hurdle I see for the utility energy storage market in 2010 is that if these utility projects are just being planned out and tested now, the market is still in its very early stages. Compressed air might have a few pilot projects kicking off this year, but that technology takes many, many years to implement.

Image courtesy of A123Systems.

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