It takes plenty of electricity to make air cold enough to turn from a gas into a liquid. What if you could reverse that process and turn that energy sink into a source of energy storage?

U.K.-based Highview Power Storage is trying out just that technology right now, in a 300-kilowatt, 2.5 megawatt-hour pilot plant built at a Scottish & Southern power station outside London that’s feeding stored energy into the grid.

Now the startup, which has raised £11 million ($17.4 million) of private investment to date, wants to build a 10-megawatt, 40 to 50 megawatt-hour facility, CEO Gareth Brett told me in an interview last week.

At that scale, Highview is targeting total costs of about $1,000 per kilowatt, or about $500 per kilowatt-hour of energy stored, he said. That price is lower than most, if not all, of the battery-based grid storage technologies now being deployed for grid-scale storage today.

In fact, it’s cost-competitive with the two most cost-effective energy storage technologies today: compressed air and pumped hydro. But where compressed air requires underground caverns, and pumped hydro requires dams and reservoirs, Highview’s system can scale up at 1 megawatt-hour of energy for every 10 tons of liquid air, Brett said.

That equals 10 cubic meters of tank storage space of the sort used all over the world to make super-cooled liquid air by companies like Air Liquide and Praxair, he said. Essentially, Highview’s system uses electricity to turn air into liquid nitrogen, and then pumps it through a system that uses ambient heat to allow the air to re-gasify, and thus expand. That drives a series of expansion turbines that generate power, he said.

That’s very similar to the process of compressing air, then releasing it to generate energy, Brett noted, but cooling air instead of compressing it allows Highview to dispense with high pressure tanks and the rest of the engineering difficulties of dealing with compressed air.

The key challenge of Highview’s process, Brett said, is its low round-trip efficiency, or the measure of how much energy you get out of the process for how much you put into it.

“If we’re just heating liquid air up to ambient temperature, we’re talking mid-50s” percent range round-trip efficiency, he said -- not nearly good enough to serve as energy storage. “But using waste heat from a power station or some other industrial process, we can comfortably get into the 70 to 80 percent round-trip efficiency stage,” he said.

That’s equivalent or better than the round-trip efficiencies achieved by flow batteries, which are the closest in cost to Highview’s system, and while it’s not nearly as efficient as lithium-ion batteries, those are a lot more expensive at present.

So why hasn’t anyone else come up with liquid air as an energy storage medium? Brett said that it’s a matter of separate industries not finding one another. 

“If you take our system, the front end of it comes from the industrial gas business,” he said. “Apart from having huge electric bills, they’re not really thinking about selling energy. The other end of our system comes from power station technology … the utility business doesn't generally think about cryogenic gases.”

“To put the two together, you’ve got to have a foot in both camps,” he said. While university research has taken a look at the concept, Highview holds patents on its overall system, he said.

Highview plans to hold a venture capital round in mid-2012 to raise from $5 million to $10 million to fund operating costs it expects in preparation for its large-scale pilot project, Brett said.

“We’re completely pre-revenue, obviously,” he said. “We’re looking for a host that’s sufficiently interested in the technology to buy a system,” with potential partners including utilities or companies like GE or Siemens that build the turbines and other grid gear needed to make the system a working unit.

Clearly, Highview’s system has limitations -- such as its need for a nearby source of waste heat to operate at effective efficiencies -- that could bar it from certain applications, like substation power backup and the like. But the technology is also effective at delivering power with response times that could allow it to play into certain ancillary services markets, he noted.

We’ve seen a number of technologies compete for the title of groundbreaking grid energy storage system, including flywheels, zinc-air batteries, above-ground compressed air energy storage, and others. The proof for all of them remains to prove their technologies work as promised, and then showing that they can compete in the still-evolving markets for selling stored energy to the grid.