With all the talk about lithium ion batteries, and the unprecedented investment occurring in this area, it is easy to forget the most prevalent utility-scale energy storage technology, pumped hydro. Pumped hydro is the most mature and largest storage technology available. Worldwide, there are over 150 pumped hydro facilities with a total capacity of over 100 GW. In the United States, there are 38 pumped hydro facilities and a total capacity of approximately 19 GW. Battery deployments are just beginning and are typically measured in tens of megawatts rather than hundreds.

Pumped hydro is based on conventional hydroelectric technology. Facilities pump water from one reservoir into another at a higher elevation, typically using lower-priced off-peak electricity. When energy is required, the water in the higher elevation reservoir is released and runs through hydraulic turbines that generate electricity. One key advantage of this system is that the gravitational energy stored in the upper reservoir can be stored for long periods of time with virtually no energy loss. For pumped hydro to make economic sense, it must be constructed on a large scale, which involves a high initial facility construction cost and be able to leverage favorable geographic assets.

In 1985, a 2,100 MW pumped hydro facility in the United States cost $1.7 billion, or approximately $800 per kW. Today, a new pumped hydro facility costs approximately $1,500 per kW, give or take. Once built, the cost per kWh of storage is relatively economical, approximately $125 per kWh. While there are a myriad of citing and permitting issues, there are 40 pumped hydro facilities, totaling approximately 31 GW, planned in the United States alone. The question is: how much more growth will we see of this technology? Pike Research believes it could reach upwards of 4.5 gigawatts per year, once the reality of large-scale renewables integration starts to happen in 2015 and beyond. This forecast may seem lofty, but really it comes down to building 20 – 40 facilities worldwide that average between 500 megawatts and 1 gigawatt. Is the forecast aggressive? Arguably yes. Is it feasible? Yes. Most close to the energy storage market acknowledge that a range of technologies are part of the solution. Only time will tell how much of the mix is comprised of pumped hydro, and perhaps more importantly when.

Telecommunications networks require reliable backup power solutions that can operate for hours or even days when the utility grid fails due to severe weather conditions, natural disasters, or poor grid quality. Typically diesel generators and lead acid batteries are used for providing backup. However, fuel cell systems are increasingly being considered as a superior backup solution. Fuel cells are cleaner and quieter than diesel generators, and they can reduce the number of batteries required at telecom sites. Fuel cells also have the advantage of being less prone to theft and more resilient to extreme outdoor temperatures.

In 2008, The U.S. Department of Energy (DOE) released a funding opportunity announcement, targeting commercialization of stationary fuel cells for communications backup. In 2009, a consortium led by Sprint Nextel, along with proton exchange membrane (PEM) fuel cell makers ReliOn and Altergy, as well as hydrogen and fuel storage supplier Air Products and Chemicals Inc., and others, was awarded $7.3 million from the U.S. DOE.

The program calls for the deployment of 260 new hydrogen fuel cells (HFC). Also, 70 hydrogen fuel cells shall be retrofitted from a low pressure bottle swap solution to a new medium pressure solution that employs onsite refueling. The chart below shows the breakdown by state, led by the two most fuel cell friendly states, California and Connecticut.

The program provides a one-time cost offset to accelerate commercial deployment of a large number of fuel cell backup systems, which provides incentive for Sprint to make the near-term investment. The program requires long run time, defined as 72 hours backup, which is intended to establish a critical mass of HFC units, and storage modules and delivery infrastructure. With Air Products’ involvement, the program has the dedication and focus of a major gas supplier with the capabilities to bring both storage and delivery to the stationary backup market. The program also requires deployment over a short period of time, less than two years to ensure critical mass happens sooner.

The early feedback from Sprint is that the program is poised for success and that it will serve as a blueprint for the telecom industry to utilize PEM fuel cells for backup power. This makes 2010 the year when the fuel cell industry appears poised to prove out a well established technology in a legitimate wide-scale commercialization opportunity.

Given the intermittent nature of wind and solar, it is becoming increasingly clear that these technologies need a side-kick known as energy storage in order to get the full value of these renewable sources. Energy storage allows electricity produced by wind and solar, during off peak demand times, to be better matched when the electricity is needed. A major driver of growth of both the wind and solar industries has been favorable tax credit treatment. Acknowledging this fact, Congress has been working on game changing legislation aimed at the energy storage industry. On July 20, U.S. Senators Jeff Bingaman (D-NM), Ron Wyden (D-OR), and Jeanne Shaheen (D-NH) introduced The Storage Technology of Renewable and Green Energy Act of 2010 Act (STORAGE Act 2010 – S. 3617) revision to the Storage Act introduced in 2009.

There are three broad categories of storage covered by the proposed law are:

1) Utility-scale bulk storage.

2) Commercial business on-site storage.

3) Residential on-site storage.

The proposed law allocates $1.5 billion of tax credits for energy storage technologies deployed on the electricity grid.

For utility-scale, the Storage Act contemplates a 20% investment tax credit up to $30 million for any one project. The size of the storage system must be at least 1 MW of capacity with a rated output of at least one hour. For commercial business on-site storage, the Storage Act provides a 30% tax credit, up to $1 million for deployment of energy storage on premises to better manage electricity requirements, or provide a temporary resting spot for excess electricity produced on the grid. Systems must have a capacity of at least five kilowatts that can be discharged over four hours, or the energy equivalent 20 kilowatt hours. For residential on-site storage, the proposed law contemplates a 30% tax credit for systems that can store on-site the energy equivalent of at least of 500 watts of electricity for four hours, or two kilowatt hours of energy.

While it is very difficult to predict how the legislative processes will turn out, it appears that the Storage Act is close to becoming reality, most likely in 2011. If so, it should serve to transform the energy storage industry that Pike Research forecasts could reach 30 gigawatts by 2020.

There are signs that 2010 could be the coming out party for Compressed Air Energy Storage (CAES). With the onslaught of large wind and solar deployments that will be added to the grid to meet state renewable portfolio standards requirements, there is a lot of buzz about the need for energy storage systems, particularly bulk energy storage. Bulk systems can store megawatt-scale amounts of energy produced during off peak times. They then discharge that energy during peak times, when prices are higher, and over many hours. With so much attention and investment paid to lithium ion batteries, it is easy to forget that advanced batteries are not true bulk storage technologies. However, CAES is.

Historically, CAES projects have faced an uphill climb in terms of site selection and permitting. However, there is now tangible evidence of market momentum and validation. CAES Development Company recently sold to FirstEnergy Generation the rights to the Norton (Ohio) Energy Storage Project, a site that will exceed 2 GW if all phases are complete. Pacific Gas and Electric is in the process of validating the design and performance of a 300 MW CAES project near Bakersfield, CA. New York State Electric and Gas (NYSEG) will be demonstrating a 150 MW CAES technology plant using an existing salt cavern in Watkins Glen, NY. There are also other small demonstrations from CAES technology providers that do not require natural gas to heat the compressed air and generate electricity.

For bulk energy storage there are three key dimensions to consider: capacity or rated power (measured in the hundreds of megawatts), discharge duration (measured in hours), and cost of energy (measured in $/kWh). CAES scores high on these dimensions and can cost as little as $60/kWh for larger systems, less than any other energy storage technology. A significant portion of U.S. geology has the bedded salt/salt dome geology that is most suitable for CAES and that geology’s overlap with large wind is significant. Also, CAES is a very flexible resource that can also provide shorter duration regulation services. The project finance nature of CAES makes the technology scalable.

Accordingly, Pike Research estimates that the CAES market will grow from 453 MW in 2010 to nearly 7 GW by 2020, which will cement the technology’s role in helping integrate renewables on the grid.