With the passing of 2011, the energy storage industry has seen tremendous changes. Despite a few growing pains, the industry is in a substantially improved state than it was a year ago. Policies have improved, awareness is up, and new technologies have been explored and received millions of dollars in investment.

The Good News

First, I’ll start off with the good news, and there’s been much of it. Most of it has been around great improvements in both policy and incentives, specifically for energy storage. A few of the highlights this year include:

FERC Pay for Performance Ruling

Under the guidance of Jon Wellinghoff, FERC has transformed policy in favor of energy storage technologies

In 2011, under the auspices of Jon Wellinghoff, the Federal Energy Regulatory Commission (FERC) worked diligently to retool the compensation model its independent system operators (ISOs) and regional transmission operators (RTOs) use for ancillary services (frequency regulation, voltage support, etc.). The result was a big win for utility scale energy storage technologies. In the fall, FERC ruled in favor of a “pay-for-performance” model that would require ISOs and RTOs to compensate fast-acting energy resources, like flywheels for example, more favorably than inefficient traditional means like spinning reserves. Beacon Power was a big proponent of this decision, as their technology (and existing projects) was was in line to immediately benefit. However, it proved too little too late for the company, as Beacon Power was already preparing to file bankruptcy.

California’s SGIP Amended in Favor of Energy Storage

With great support from the California Energy Storage Alliance (CESA), California’s wildly popular Self Generation Incentive Program (SGIP), which provides state incentives for wind, fuel cells, CHP and more was amended in the fall to include stand-alone energy storage. Previously, energy storage would qualify for the program so long as it was paired with a renewable generation source like wind or solar. Now, energy storage can be installed on its own and receive up to $2.00/W against the installation costs. The program aims to encourage the technology for demand response applications (2 hour discharge minimum), rather than ancillary services. Capped at $5 million per project, the incentive is also focused on end users and adopters of distributed energy resources, rather than utility-scale projects. This amendment to the program should spur additional interest in energy storage and encourage end users to pursue projects they once considered to be too expensive.

STORAGE Act Reintroduced

In the fall of 2011, the Storage Technology of Renewable and Green Energy Act  (STORAGE) was reintroduced in the senate by senators Bingaman, Collins, and Wyden (NM, ME, and OR states respectively). Like its predecessors over the last two years, the STORAGE act of 2011 would amend the popular renewable energy investment tax credit (ITC) program to make energy storage qualify as a stand alone technology. If passed, up to 30% of energy storage project costs would be credited to the owner, via a tax credit. This could have big implications to the industry, as the main hurdle to wide-scale adoption of energy storage has been the prohibitive costs. Large scale installations of batteries, flywheels, compressed air and others often cost so much to build that the return on investment is poor at best. If STORAGE 2011 were passed, this would be a tipping point for the industry, allowing for significant development of energy storage projects through reduced capital costs. As of the writing of the post, there is no word on whether the STORAGE Act has moved through the senate. After passing the senate, the bill would still need to clear the house, then be signed by the president.

ARPA-E Spurs Private Investment

ARPA-E: The Advanced Research Projects Agency - Energy, has numerous wins in the energy storage field.

Following over $65 million in DOE ARPA-E awards for energy storage projects to organizations in 2010, an additional $36 million in follow-on private investment has been made. In particular, flow battery maker Primus Power received $11 million and Stanford University’s “all electron battery” project received $25 million in 2011. The idea behind the ARPA-E  program is to give these organizations enough funding to commercialize their technology and pave the way for private investment. And with this additional private funding, it’s clear that’s exactly what’s happening.

In addition, ARPA-E awarded over $37 million in grants for thermal energy storage projects in 2011. The 15 organizations receiving the awards will work on projects ranging from high temperature storage through molten glass to thermal storage applications for HVAC in electric vehicles. While thermal energy storage is a not new idea, new age renewable energy and electric vehicle technologies have spurred additional interest in the technology. With additional investment in thermal energy storage, ARPA-E is clearly demonstrating they are willing to fund these high risk, but high reward projects.

The Bad News

Despite the positive direction for the energy storage industry, it saw some setbacks in 2011. Several major “black eyes” from the year include:

NGK Insulators Halts NAS Battery Production After Fires

After two major NAS battery fires this year, NGK has halted production and shipments of its flagship energy storage technology.

NGK Insulators’ NAS (sodium-sulfur) batteries were involved in a (presumably large) fire in an installation owned by Tokyo Electric Power Company (TEPCO) in September. Following the incident, NGK halted production and shipments and advised its customers to avoid using the batteries until it could determine the cause of the fire and provide a solution to prevent future failures. This kind of reaction is exactly what is needed by the industry right now. NGK is demonstrating an industry-leading commitment to safety that should be noted by all energy storage companies. While the short term impacts aren’t pleasant (NGK revised income down by 20% due to the halt in orders & shipments), this should create a level of trust that will sustain the company in the long term.

Enerdel Enters Troubled Waters

Ener1, the parent company of battery maker Enerdel went downhill in a big way in 2011. After Enerdel’s partnership with sinking ship EV company Think, the Indiana-based lithium ion battery maker appears to be in troubled waters itself. Following an earnings reporting gaffe relating to Think’s bankruptcy, investors are suing the company for “materially false and misleading statements regarding Ener1′s financial condition and prospects.” As a result,  Ener1 has seen its stock  price plunge, contributing to the company’s delisting from the NASDAQ. The saga has been worsened by short-lived management changes. In November, Enerdel was on its third CEO in as many months. While the company received a much-needed batch of short-term financing, it is unclear whether the battery maker will survive to see the light of 2013.

Beacon Power Completes Landmark Project, Files for Bankruptcy

Cutaway view of one Beacon Power's 100 kW flywheel storage units.

Beacon Power’s bankruptcy was perhaps the biggest blow of the year to the energy storage industry. A darling of the market with a seemingly viable technology, Beacon’s downfall seems to be one of unfortunate timing. Beacon Power’s flywheel technology stores energy in the form of large spinning masses which are primarily used to provide frequency regulation and voltage support to the utility grid. The technology provides these benefits with a near instantaneous response time, scores faster than existing technology. In October, the Federal Energy Regulatory Commission (FERC) ruled in favor of fast-responding frequency regulation, effectively endorsing technology like Beacon’s. Unfortunately, it was too little, too late for Beacon; the Tyngesboro, Mass company filed for bankruptcy just a month later. However, chatter has circulated about Beacon reorganizing to come back leaner and meaner in 2012.

In Summary…

While 2011 saw its share of bad news, energy storage seems to have a bright future ahead. FERC’s pay for performance ruling and California’s SGIP amendment both signal that key stakeholders recognize the positive impact that energy storage can have if the right policies and incentives are in place. Now, with 2011 in the books, I’m optimistic 2012 will be the best year yet for energy storage. Stay tuned!