A123 Systems continues to outperform the advanced storage market, helping it once again earn the top spot on our list of Top Ten Startups. Since we last checked in with A123, the company has solidified its place as the world’s leading producer of nanophosphate batteries, expanded its manufacturing base with a new production facility in China, and become a critical part of the evolving EV market.

The company’s fast-charging, high-cycle lithium ion batteries are based on a proprietary nanophosphate electrode technology developed by the founders at MIT. Improvements in energy density and impedance have helped A123 solve the overheating and combustion problems typically associated with lithium ion batteries, winning them a growing list of development partners and supply contracts. Toyota execs must be kicking themselves for turning down A123’s recently patented technology a few years back.

But A123 has more than just its technology to stand on. The company has signed a bevy of development partnerships and supply agreements the company with leading EV, engineering, and automobile companies. Last month General Electric handed the company a $20 million check and an invitation to its Global Research Center. A123 is also working with General Motors on the commercialization of its Chevy Volt, and with BAE Systems to produce hybrid buses. Finally, and most importantly, A123 has signed a production contract with TH!NK (another GE-funded company and GTM’s #8 startup) to supply batteries for the TH!NK City, which is due to hit showroom floors later this year.

Click here for an interactive map of the Greentech Media Top 10 Startups for 2008.