The news coverage of energy storage company Beacon Power’s bankruptcy has focused on the $43 million loan it got from the same Department of Energy program that backed the bankrupt Solyndra. But at least Beacon left a beating heart in the form of a flywheel farm humming with megawatts of energy feeding into the grid today -- and making money from it.

That farm in Stephentown, N.Y. is filled with 200 flywheels half buried in the soil and hooked up to the New York ISO’s power grid. The farm can absorb and deliver up to 20 megawatts of grid power, available at the flip of a switch -- much faster than a natural gas-fired turbine can ramp up its output, though many are trying.

It’s one of the largest single sources of next-generation energy storage hooked up to the U.S. grid today, though AES Storage’s 32-megawatt battery system for a 98-megawatt wind farm in West Virginia recently took the title of the country’s largest. Beacon started its plant in January 2011 and earned revenue from up to 14 megawatts of capacity (140 flywheels) in the first quarter, enough to goose its first-quarter revenues to $446,000, compared to $235,000 in the first quarter of 2010.

The plant was running at full capacity by July, and presumably continues to store power despite its corporate owners’ change of financial status. Given that it’s the crown jewel of the company’s revenue-generating plans, anything that can help improve its fortunes helps the DOE’s chances of earning back its loan -- and perhaps avoiding some of the missteps it took with Solyndra's much larger, $535-million loan guarantee.

How to Keep Flywheels Spinning in Bankruptcy

That gives the government an incentive to keep the company's assets running. The Beacon subsidiary created to receive the $43 million loan guarantee and run the Stephentown plant has largely pledged its assets, revenues and cash reserves as collateral on the loan, according to a DOE spokesman.

Beacon hasn’t disclosed how much money its Stephentown plant is making. But a research paper from DOE’s National Energy Technology Laboratory projected the New York region could support revenues for frequency regulation services in the $60,000-to-$400,000-per-megawatt-year range -- a number that would give a rough figure of $1.2 million to $8 million in potential annual revenues for the 20-megawatt facility.

Indeed, that report showed that flywheels that cost $1,500 per kilowatt to install could pay themselves off by tapping frequency regulation markets in both New York and the Mid-Atlantic states served by grid operator PJM. The same report found that sodium-sulfur batteries -- the most widespread grid-scale battery technology today -- would struggle to pay themselves off. 

Not all research pegs flywheels as cost-effective, however. An Electric Power Research Institute study released in May showed that flywheels cost about double the price for lithium-ion and advanced lead-acid batteries for frequency regulation, given total system costs and payback over time. (In both cases, flywheel capital costs are given in kilowatts rather than kilowatt-hours, since flywheels have only a 15-minute supply of power, a characteristic that bars them from long-term energy storage markets.)

Keeping a Transplanted Heart Beating

Whether or not Beacon’s manufacturing costs were too high to compete with batteries or other next-generation energy storage systems is a bit of a moot point after the company’s bankruptcy, of course. But its long-term maintenance costs will be of great concern to the DOE.

On that front, Beacon has been dogged by a few high-profile failures of its systems to not blow their tops. In late 2006, a test flywheel exploded after the lab lost power, killing the unit’s magnets and allowing the spinning carbon cylinder inside to wobble and crash into the unit’s housing. Beacon went back to the lab to fix the problem and promised its New York plant would be safer.

But earlier this month, two of Stephentown’s 200-plus flywheels lost integrity and melted into a “cotton candy-like material” hot enough to trigger an emergency water cooling system that, combined with the superheated materials inside, blew the tops off the half-buried, 3000-pound chambers, according to one local news report.

In the end, maybe spinning massive cylinders held in place with magnets in airless chambers at 16,000 RPM isn’t the best way to store grid power. Still, flywheels hold theoretical advantages over batteries or fuel cells in that they have no chemicals that need to be replaced or kept out of the environment, and deliver efficiencies of 85 percent or more in terms of energy in versus energy out. And while flywheels can explode, so can batteries.

Regulations Could Double Revenues?

Beacon hasn’t disclosed what it’s making for frequency regulation in the New York market. But it has said that amount could more than double over the coming year or so. That’s the value Beacon CEO Bill Capp set on the Federal Energy Regulatory Commission’s recent decision to force the nation’s grid operators to pay more for “fast” response power than slow, fossil-fueled power.

That category included flywheels as well as batteries, and Beacon was cited often in FERC’s decision as helping prove that fast-ramping energy sources are more economical than the slower, fossil fuel-fired kind in keeping grid frequency as close to 60 hertz as possible -- so-called frequency regulation. That’s mainly because flywheels can tap their stored energy almost instantaneously and switch directions with ease, offering faster responses to the 60-times-per-second fluctuations of the actual power coursing through the lines.

Still, there’s a long time between FERC’s ruling and actual changes among the country’s frequency regulation markets to put its will into effect. FERC has said it doesn’t think any more pilots are needed before the country’s grid operators start changing their prices, but it also gives them discretion to design their own programs that meet the basic requirements of a two-part payment system that rewards faster response. That will take months, if not a year or more, and how big of a boost it will give different types of energy storage technologies once it’s implemented remains an open question.

What Can and Can’t be Saved

Beacon’s bankruptcy hasn’t left all of its flywheel dreams intact, and there are other projects unlikely to pay back their government backing.

In 2009, Beacon got a $24 million smart grid demonstration grant to help it build a 20-megawatt flywheel farm in Illinois, though the project was later shifted to Pennsylvania after the state offered $5 million more. That adds up to $29 million, or just over half of the plant’s projected $53 million cost. It’s not clear how far along that project is, but it’s hard to imagine a scenario that allowed it to carry on. Beacon hired investment banking firm Group Robinson earlier this month to land financing for the plant, but Sunday’s bankruptcy filing recognized that that effort had failed.

Beacon also got a $2.8 million grant from DOE’s ARPA-E program in September last year to develop flywheels with four times the energy storage at one-eighth the cost. Beacon earned $164,000 through its ARPA-E contract in the first quarter, up from $79,000 the previous year. It was also supposed to cover 20 percent, or $560,000, of that project’s $2.8 million cost. How much of that amount has already been paid off isn’t clear, but what’s left undone presumably won’t be ongoing under bankruptcy.

Beacon’s government work also includes wind power and hydropower backup tests underway with the California Energy Commission and Pacific Northwest National Laboratory. It's unclear whether the project partners could keep those flywheels running and for how long, given that the company that makes the spare parts is now bankrupt.

All told, Beacon reported $72 million in assets, which presumably included the Stephentown plant, its 3-megawatt Massachusetts plant and whatever remains of the Pennsylvania project. Beacon also reported $47 million in debts, which presumably includes the $39.1 million it’s drawn from the DOE loan and another $3.45 million on a Massachusetts state loan. I’m curious to see what proposals emerge in bankruptcy proceedings over if and how to make those assets pay off over time.

 

What Does It Mean for Energy Storage?

The answer is, not much. Beacon Power was rare in being a publicly traded company backing a nearly unique technology for a grid energy storage market that barely exists today. Where it does exist, the vast majority is supplied by pumped hydropower, which remains the cheapest and most reliable energy storage technology in the world.

Of course, you can only build so many reservoirs, particularly if we’re going to start storing and balancing the intermittent power coming from solar and wind farms at scale. Grid-scale energy storage is a big business for Japan’s NGK, which makes sodium-sulfur batteries, and publicly traded A123 Systems and Altair Nanotechnologies are building megawatts' worth of lithium-ion grid storage. Flow battery startups such as ZBB Energy and Prudent Energy are testing systems, and solid-state battery startup Xtreme Power has more than 20 megawatts deployed to back up wind power in Hawaii.

But these projects are largely specialty applications offering outsized returns on still-expensive technology by backing up grids that would be way too expensive to beef up otherwise. Hawaii’s electric grid is one obvious example, as is AES Energy Storage’s biggest project in Chile, using A123 batteries, which backs up a remote mining operation. Wind power backup, the other big application for grid-scale batteries, tends to be used by the utility for voltage smoothing and other operational purposes, rather than for bidding into markets, although AES has said its 32-megawatt wind backup batteries in West Virginia will play into frequency regulation markets.

But bidding stored energy into power markets puts batteries, flywheels and fuel cells in another competitive class entirely, duking it out with turbines fueled by cheap (for now) natural gas. FERC’s new ruling could tip the scales in storage’s direction against this competitor, but the companies and utilities building these systems will have a lot more to prove before storage moves to a mass market.

Tags: a123 systems, aes energy storage, bankruptcy, batteries, beacon power, energy efficiency, energy storage, flywheel, smart grid, solyndra