Electric transmission and distribution has long been a tough nut for technology innovation. But deregulated power markets are helping technology developers bypass notoriously tight-fisted, conservative utilities.

TransÉnergie led the way, using DC power technology to build its own “merchant” power lines that carry power for the highest bidder, rather than simply serving the local utilities (see “TransÉnergie: Playing Two Power Games”).

Now energy storage developer Beacon Power Corp. of Wilmington, MA, is proposing a similar end-run around slow-moving utilities. Rather than marketing its flywheel-based energy storage systems to utilities, the company plans to build its own merchant flywheel plants that move power on and off a power line to stabilize the grid.

It is an idea that’s attracting attention from the independent system operators (ISOs), the regional organizations charged with operating the nation’s power grids. California’s and New York’s ISOs are already testing Beacon Power’s equipment. And Matt Lazarewicz, the company’s chief technical officer, says an equally important constituency to impress is Wall Street. According to him, the merchant model is the only model Wall Street will finance. “The returns are higher that way,” says Lazarewicz. “As soon as you say a utility’s going to buy something or do something, investors roll their eyes and walk away.”

Beacon Power’s flywheel energy storage systems are designed to provide frequency regulation – a service for which ISOs paid more than $600 million last year. Grid operators need help with frequency regulation because the frequency of a grid’s alternating current is constantly fluctuating as electric devices and generators turn on and off, causing temporary imbalances in power production and demand. Unmet demand puts a strain on a grid’s power plants, slowing them down and dragging the grid frequency below its set-point (60 hz in North America, 50 hz in Europe and most of Asia). Excess supply has the opposite effect. And either condition can cause utility lines and power plants to automatically disconnect from the grid, thereby preventing damage to utility and customer equipment, but also increasing the risk of blackouts.

ISOs currently rely on fossil-fuel power plants – primarily gas turbines – to smooth out a grid’s frequency variations. Utilities bid to provide this service, in doing so, placing a set proportion of their power plants’ capacity (some 1-2 percent of a grid’s total power generation) under the ISOs’ direct control. On signals from ISOs, designated plants ramp up and down to roughly balance supply and demand. It’s a costly and polluting process because power plants burn their fuel most efficiently when run steadily and at full capacity. “Doing regulation with fossil-fuel generation is the tail wagging the dog,” says Imre Gyuk, who runs the U.S. Department of Energy’s energy storage research program.

Gas-fired frequency regulation is also increasingly expensive, due to the increasing cost of natural gas. Dan Mears, president of the San Diego-based energy consultancy Technology Insights, says high-cost gas hits the ISOs twice. In addition to boosting the cost of gas-fired frequency regulation, high gas prices are accelerating the installation of wind turbines, whose gusty, choppy power output may increase the need for frequency regulation. “It’s a problem feeding on itself,” says Mears.

Beacon Power’s flywheel storage systems are programmed to zero out frequency fluctuations by recycling energy: an electric motor uses excess grid power to accelerate magnetically levitated carbon and fiberglass flywheels to as high as 22,500 rpm, then discharge that stored kinetic energy by regenerating the electricity when the grid frequency dips. Unlike batteries – the leading competitor in energy storage – Beacon’s flywheels can withstand continuous deep cycling without losing capacity.

The most recent test of its technology, a four-month trial begun last week at Pacific Gas and Electric’s San Ramon research center, employs seven 6-kilowatt-hour flywheels, each the size of a small refrigerator, ganged together to form a system that can absorb or discharge 100 kilowatts of power for 15 minutes. For commercial systems, Beacon Power is building 25-kilowatt flywheels the size of tall refrigerators, which would be combined in clusters to deliver 1 to 20 megawatts.

The flywheels’ rapid response should also make every megawatt go further than the equivalent output from a gas-fired power plant, say officials at the California Energy Commission in Sacramento, which is cofunding the California demonstration with the U.S. Department of Energy (DOE). Mike Gravely, the California Energy Commission project manager tending the San Ramon tests, says gas-fired generators can take five minutes or more to respond to California ISO’s frequency control signals (issued every four seconds). By then, the system has often moved back toward equilibrium on its own. In contrast, Beacon’s flywheels are capable of switching from full power absorb to full power discharge faster than Cal-ISO can send its commands. “There’s a possibility that if you can respond to the needs faster, you may not need as much energy – you can do more with less,” says Gravely.

Gyuk at the DOE predicts that just 100 megawatts of flywheel reserve – half of what California buys from conventional generators today – could handle 90 percent of the state’s frequency problems. And, if the costs come in as Beacon Power predicts, the resulting savings could be substantial. Lazarewicz says a one-megawatt plant will cost about $1.5 million to build and can expect to earn about $400,000 per year from the ISOs for its services. As a result, Lazarewicz says the plant should pay for itself in four years, even after covering the cost of the power lost in running the systems (about 15 percent of the total energy handled).

Mears says the flywheel’s quick response could also have a welcome side-benefit: improving the grid’s reliability. Flywheel plants could free up gas-fired plants to provide extra peaking power on sweltering summer days when air conditioners are at full blast and interstate power lines are full. What’s more, the flywheel’s quick response could keep a tighter hold on the grid’s frequency, squelching power deviations that start small but, when the system is overstressed, can initiate a cascading failure. “Keeping the grid stable is the whole idea behind frequency regulation,” agrees Lazarewicz. “This is simply a way that we can do that better, and cheaper.”