Pacific Gas & Electric will seek $25 million in Department of Energy stimulus funds to help pump lots of air underground, then release it to help generate cheap electricity at peak demand times.

That's the plan the utility outlined on its Next100 blog on Wednesday for a 300-megawatt energy storage project in western Kern County. It's the second publicly announced utility project seeking funds for grid-sized energy storage from DOE's $615 million smart grid demonstration grant program, which sees its first application deadline expire today.

PG&E envisions using cheaper electricity – mostly from wind turbines – to pump air into an underground reservoir when electricity is cheap. The compressed air can then be released to boost a gas turbine, helping to generate up to 300 megawatts of stored energy for up to 10 hours.

Such systems have some drawbacks compared to batteries, including the limited availability of underground caverns or geologic structures to store the air, as well as its limitation to boosting natural gas-fired generation rather than providing power directly.

Fellow utility Southern California Edison said Tuesday that it would seek $25 million in smart grid demonstration grant funds to install a 32-megawatt-hour lithium-ion battery, to be built by A123 Systems, to help incorporate more wind energy into its grid (see SoCal Edison Wants A123's Biggest Grid Battery Ever).

Utilities including American Electric Power, Xcel Energy and Tokyo Electric Power Co. have installed megawatts of sodium sulfur batteries for grid storage, and General Electric is among the companies working on improving grid battery technologies to bring down costs (see GE Aims at Energy Storage for Trains, Grid).

But batteries – whether the more expensive lithium ion or cheaper sodium sulfur and flow batteries – are still far more expensive than compressed air energy storage, or CAES (see What Is the Cheapest Energy Storage Idea of Them All?).

In fact, according to the Electric Power Research Institute, it's among the cheapest, besides pumping water uphill and letting it flow to spin a turbine – another technology limited by the availability of water and reservoirs to hold it. PG&E's Helms Pumped Storage Facility is one such "pumped hydro" storage project.

Still, backers of grid batteries – as well as systems like flywheels and fuel cells – say they could lower prices as more systems get deployed (see Batteries for the Grid and GridPoint to Manage Wind Power Battery Storage).

It's led some market watchers to predict a big boom in the grid storage market in the years to come (see Grid Storage Batteries and Ultracaps: An $8.3B Market by 2016).

But so far, most of the smart grid stimulus applications have shied away from storage as a focus, looking instead to accelerate smart meter deployments or grid automation and control systems (see Green Light post).

Beyond stimulus funding, a bill proposed by Sen. Ron Wyden (D.-Ore.) could offer grid storage some tax incentives equivalent to those now enjoyed by solar and wind power investors (see Energy Bill Could Boost Storage Technologies).

PG&E is also asking the DOE for $42.5 million to install energy monitoring and control systems at about 75,000 of its commercial and industrial customers. The request is for DOE's $3.4 billion smart grid investment grant program, which is aimed at commercial-scale projects (see PG&E Seeks $42.5M in Stimulus Grants).

Interact with smart grid industry visionaries from North American utilities, innovative hardware and software vendors and leading industry consortiums at The Networked Grid on November 4 in San Francisco.