Deeya Energy has landed a $30 million C round to help it scale up production of its "L-Cell" flow batteries – yet another sign that energy storage remains one of the brighter spots amid a difficult fundraising climate for green tech startups.

The new funding round – first reported as a well-sourced rumor by Greentech Media last week (see Green Light post) – brings the Fremont, Calif.-based company's total venture capital investment to $53 million. New investor Technology Partners joined existing investors BlueRun Ventures, Draper Fisher Jurvetson, Element Partners and New Enterprise Associates in the round.

Deeya, founded in 2004, also raised $15 million in January 2008 and about $7.5 million in an earlier round of funding (see Funding Roundup: First Deals of the New Year).

Deeya's redox flow batteries are aimed at providing a low-cost alternative to lithium-ion and other advanced batteries – about 10 to 20 times less expensive, the company says.

Redox flow batteries work by moving an electrolyte through a reactor that converts their chemical energy to electricity. Spent electrolyte is recovered for recharge while newly energized electrolyte is pumped back in.

That system combines a battery's efficiency with a fuel cell's bulk energy storage capacity, according to NASA, which first developed the technology behind Deeya's energy storage platform in the 1970's.

Deeya has first targeted its technology for India's cellular industry, offering its devices to store power for cell towers that otherwise use dirty and expensive diesel generators – either because they're off-grid, or because they're on a grid known for its unreliability, CEO Isak Bencuya said Tuesday.

Tuesday's funding round will allow Deeya to make "a couple thousand" of its 2-kilowatt flow batteries for those cell tower operators, which Bencuya declined to name. Those should start shipping this month and be delivered through 2009, he said.

Deeya is targeting similar cell tower applications – there are about 100,000 of them around the world, according to the GSM Association (see Green Light post) – as well as industrial backup power and consumer applications like storing power from rooftop solar panels, Bencuya said.

But Deeya is also targeting larger-scale storage markets, and intends to develop technology for 1-megawatt sized flow batteries within the next 12 to 18 months, he added.

Could Deeya's flow batteries become a preferred means of storing energy for stationary applications – particularly grid storage for intermittent wind and solar power? That's the $46 billion question, according to Deeya's estimation of the market.

"For any kind of smart grid application, we feel we will be very competitive in costs," Bencuya said. But the company will face a lot of competition.

The cheapest forms of mass energy storage, pumped hydro and compressed air storage – essentially pumping water uphill or air into underground caverns when power is cheap, then releasing it to generate power when peak loads approach – are limited in where they can be built.

Other large-scale grid power storage projects underway so far have used sodium sulfur batteries from companies like NGK Insulators, but they're far more expensive than pumped hydro (see Batteries for the Grid and GridPoint to Manage Wind Power Battery Storage).

The massive amounts of money being devoted to developing lithium-ion batteries for the automotive and consumer electronics fields could bring the costs of that technology down to a point where it is competitive for grid storage, analysts say.

"Lithium Ion batteries are certainly getting a lot of support because of the automotive applications," Bencuya agreed. But then there is the question of raw materials cost, he added.

"Lithium is a very expensive material," he added, whereas Deeya's flow batteries use iron and chrome – cheap materials that also differentiate Deeya from other flow battery makers that use more expensive materials like vanadium, he said.

The potential for energy storage to take a load off utilities and help integrate renewable energy sources into the grid has led to a flurry of investments into the sector.

Energy storage garnered $121.5 million in venture capital investment in the first quarter of this year, second only to solar power in dollars invested, albeit from a shrinking total (see Optimistic News in Greentech VC and For 2009, It's All About Smart Grid and Storage). 

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