Electric vehicle startup Coda has spent the past year making plans to bring its battery expertise to the grid-scale energy storage market. On Friday it made those plans official with the launch of Coda Energy.

Now comes the task of building megawatts of lithium-ion-battery-based grid storage for a market that’s still very challenging, all while competing with rival companies, including other EV makers, that have the same idea.

While Coda Energy hasn’t named any customers yet, lithium-ion battery maker A123 has about 100 megawatts of grid storage being built around the world, and fellow Chinese EV maker BYD recently launched one of the world’s largest (36-megawatt) grid energy storage facilities in China last month.

Still, Coda has some bona fides behind its grid storage push, including its joint venture with big Chinese battery maker Lishen, into which the two companies pledged to invest $100 million in 2010. Coda also bought battery management startup EnergyCS in September, giving it technology to help integrate batteries with the grid.

It also has some projects in the works, Ed Solar, senior vice president of Coda Energy, said in an interview this week. Those include a 2-megawatt, 4-megawatt-hour project backing up a renewable power facility, he said, though he wouldn’t name the partners or the location of the project.

Coda Energy is also talking with a utility on a substation energy storage project, as well as commercial and industrial customers interested in on-site batteries to supply both power reliability and demand charge mitigation, he said.

“We’re also working with business partners that are aggressively moving in the demand management and demand response world and are putting energy storage at industrial locations, to arbitrage energy and to control that energy usage cost,” he added.

In all cases, “The battery pack we use on the automobile side is the one we’ll be scaling for the grid storage side,” he said, and the battery management technology it has developed for EVs is also making its way to grid storage. The idea is to provide energy storage systems that can be scaled up and down to fit different customers in different markets, he said.

Even so, battery-based energy storage at any size is still cost-prohibitive in comparison with simply building new generation capacity in all but a few rare settings, such as remote industrial sites or islanded power grids. Solar wouldn’t discuss the price points Coda Energy was targeting for its energy storage systems, but agreed that the storage industry faced a challenge in competing with natural gas-fired power in most cases.

Still, the rise in manufacturing to support electric vehicles is predicted to lower the cost of lithium-ion batteries over the coming years, which should bring down costs. At the same time, the strains placed on the grid by the growth of intermittent wind and solar power could raise the value of fast-reacting energy storage that can be supplied by battery-based systems.

In the meantime, Coda has yet to launch its first all-electric sedan, which was originally set for launch in 2010, before being delayed to the fourth quarter of last year and then pushed back to next month. Recently, Coda announced a version of its EV with a smaller battery pack, and thus a slightly lower price -- a move seen as an attempt to compete with the even cheaper Nissan Leaf and Mitsubishi i.

Tags: a123, batteries, byd, china, coda, energy storage, investors, lithium-ion, mitsubishi, nissan, smart grid, venture capital