General Electric has won a $2 million federal stimulus grant to work on a smart grid project – but it isn't from the Department of Energy.

Rather, the funding comes from the Department of Defense to build a "microgrid" at its Marine Corps base in Twentynine Palms, Calif., GE reported Wednesday.

The idea is to give the base a "smart energy management system" that combines on-site power generation, energy storage and monitoring and control systems to make the entire base use power more efficiently.

GE has developed a microgrid controller to manage the complex interactions that such a system will require, allowing the base to both function as an isolated unit, making and using its own energy, and to interact with the larger-scale grid it's connected to.

The idea of a self-contained grid is doubtless attractive to the military, given its need to keep bases powered in every contingency. But it's also seen as a potential way for utilities to integrate energy storage systems and renewable power sources like solar and wind at manageable scales.

Duke Energy is working on a microgrid pilot project in its headquarters city of Charlotte, N.C., involving a 50-kilowatt solar panel array, a 500-kilowatt zinc bromide battery to store power, and about 100 homes linked up with home energy management systems that communicate with the utility (see Integral Analytics: Orchestrating Duke's 'Virtual Power Plant').

Another microgrid project called FortZED (for Fort Collins, Co. Zero Energy District) is underway in Fort Collins, Colo.. That one is funded by the Department of Energy (see Green Light post).

There may well be other microgrid projects seeking funding from the $3.9 billion in smart grid grants the DOE plans to start awarding this year (see DOE Issues Rules for $3.9B in Smart Grid Stimulus Grants).

Putting lots of batteries in people's backyards to manage the storage needs of the electricity grid may seem like a no-brainer.

But according to Sunil Cherian, CEO of Spirae, it's all about brains – brains on the grid, that is.

That's because thousands of batteries serving backup power purposes will have to be integrated in a way that keeps them from being more disruptive than helpful, Cherian said Thursday at the Smart Grid Innovation Symposium sponsored by Innovation Center Denmark in Menlo Park, Calif.

Cherian has experience with the conundrum, given that Spirae's business is in integrating distributed energy generation and storage projects, including a Department of Energy funded project called FortZED (for Fort Collins, Co. Zero Energy District) and another with Danish transmission system operator Energinet.dk.

"When you add ore and more of these distributed resources into the distribution network, you're changing the operating model" of the grid, he said. "As penetration increase, you really have to worry about how do you manage the system in such a way that these things don't interact with one another."

Take one of the first purposes to which such a storage network could be applied, and which utility experts at Thursday's symposium said was likely to be one of the first that makes commercial sense – frequency regulation (see GE Gives its Energy Storage Outline).

That's the job of keeping grid electricity flowing at a constant 60 hertz, or cycles per second. Such frequency regulation takes up as much as 1 percent of North America's power production, today almost entirely provided by fossil fuel-fired power plants kept running to respond to infrequent signals from grid operators – not the most efficient way to do it.

Flywheel maker Beacon Power Corp. (NSDQ: BCON) is doing projects with utility American Electric Power and grid operator ISO New England to provide those services (see Green Light post).

American Electric Power is discussing the potential for distributed storage to fit some of those needs, Cherian noted (see Utility to Try Backyard Storage).

While AEP hasn't specified what kind of storage devices it's looking at, several observers at Thursday's conference suggested depleted electric vehicle batteries – too worn down to stay in cars, but with enough oomph for grid storage – could be one solution.

Lithium-ion automotive battery maker A123 Systems is looking at the potential for such a shift, working in partnership with investor General Electric to develop grid storage systems for utilities (see A123 Batteries to Help Stabilize Electric Grid).

The trick with frequency regulation, however, is that it needs to be dispatchable in less than a second, Cherian said.

Now, that requirement in itself doesn't necessarily need communications systems with equal speed and reliability to serve the purpose, he noted. Storage devices could be designed to sense frequency fluctuations and respond accordingly.

The problem with that, of course, is that if all of them respond automatically at once, that will lead to a fluctuation in the opposite direction – thus making the problem worse, not better.

"That is the big problem that I don't think is fully appreciated today," he said.

Designing a workable distributed frequency regulation system will likely require a lot of clever combinations of communications, along with onboard controls that incorporate information about how many other batteries are on the grid, statistical models for how they will likely respond, and other hard-to-calculate variables, he said.

The same questions are sure to arise as more and more rooftop solar and other distributed generation systems come online, or as electric and plug-in hybrid vehicles present new demands – and new opportunities – for utilities and grid operators, he said. 

Everyone wants to sell technology to GE. Luckily, Kevin Skillern, who runs the VC unit inside GE's Energy Financial Services Group, explained how the behemoth breaks down the energy storage market.

The first tier belongs to devices, such as flywheels, that can store power for a few milliseconds and up to 15 seconds. These devices exist to keep equipment in power plants safe from disturbances and fluctuations.

The second tier of devices can hold power for five to 30 minutes and mostly exist to keep the grid stable. The frequency stays the same despite the load. Examples of this kind of technology would be banks of lithium-ion batteries. GE has invested in A123 Systems, which is testing out lithium-ion battery packs at utilities. "We are seeing stuff on the cusp of being economically sensible," he said.

The third class, panacea storage, could "shift power from day to night," he said. With this kind of storage, power produced by wind farms in Texas at 3:00 a.m. could be stored until the morning. The company is somewhat "bearish in the near term," he said. "The technologies are still five to 10 times too expensive."

But progress is coming. GE, after all, announced it would invest at least $100 million into a factory in New York to make sodium batteries, which can do persistent storage. GE's first sodium batteries, coming in 2010, will go into trains, but they could also be used at wind or solar farms.

As for smart grid, Skillern was quite upbeat. In the U.S., power costs around 9 cents per kilowatt hour on average. In Europe, it's around 22 cents. Some smart grid applications have the potential to bring it down, in some circumstances, to three to nine cents, he said. If an energy services company offered to handle your lights for 12 cents a kilowatt hour (nine cents for power, three cents for their fee) companies would do it.

Valence Technology (NSDQ: LVNC) on Thursday joined the ranks of battery makers seeking federal stimulus funding for a new factory in Texas.

The Austin, Texas-based maker of lithium iron magnesium phosphate batteries said it hopes to secure $225 million over three years from the Department of Energy's Electric Drive Vehicle Battery and Component Manufacturing Initiative.

Valence hopes to raise the remaining $359 million for the project through state and local taxes and other incentives. The factory could build about 660,000 battery packs per year with a storage capacity of more than a million kilowatt hours, and could be open as early as mid-2012, the company said.

Get in line. There's already a long line of companies hoping to get a piece of the $2 billion in the program for battery manufacturing grants. Those include Planar Energy Devices, General Electric, and earlier this week, Chrysler, which said it would seek $448 million from the program and another DOE stimulus program (see GE Aims at Energy Storage for Trains, Grid).

Valence is also seeking up to $608 million from another DOE stimulus program, the Advanced Technology Vehicles Manufacturing Incentive Program. That program has $25 billion available, and companies seeking funding from it include lithium-ion battery maker A123 Systems, which is seeking up to $1.8 billion, and a consortium of chemical and battery manufacturers seeking up to $1 billion for a commonly shared battery cell factory (see A123 Lands $100M in Tax Credits and Will The U.S. Move From Arab Oil Dependence to Asian Battery Dependence?)

Valence has so far taken a slightly different tack than those others, concentrating on making batteries for electric buses and commercial vehicles at first and then shifting into the car market (see Valence: Electric Buses and Trucks First, Cars Later). Founded in 1989, it has spent most of its time making batteries for computers.

New York Gov. David Patterson and General Electric CEO Jeff Immelt will announce an alliance that will lead to green jobs and technological development in upstate New York tomorrow, according to GE. The two will make their announcement at 10:00 a.m. ET.

I don't have any more information than that at the moment, but, let's face it, those are big names so you will want to know what is going on. For the past several years, New York has tried to woo high-tech companies from California, Texas and Massachusetts. Former Gov. George Pataki set up a number of tax, credit and land development programs to attract chip makers in the first part of the decade. The state only attracted a few chip makers, although U.S. manufacturers gave the overall shape of the program high marks. Several state universities also set up research centers that collaborated with the likes of Dell and others. Thus, this might involve GE setting up a material science laboratory or wind research center that will spill into manufacturing.

Later this week Patterson will also speak at the American Solar Energy Society's annual conference, taking place in Buffalo. Buffalo? Why not. Germany is still one of the largest solar markets in the world and Ontario right next door has been investing heavily into solar and other renewable technologies. PV panels work well in snow because of the reflected light and cool temperatures.