SustainX, a startup in West Lebanon, New Hampshire, has received $20 million in venture capital to test its compressed-air energy storage technology on a large scale.

The technology could allow for a wider use of compressed-air storage, which in turn could make renewable energy more attractive, since it would allow wind power generated at night to be stored until daylight hours, when demand is higher. If it’s successful, the technology could decrease the need to build natural gas plants to supply peak power demand.

The need for storage is increasing as governments mandate the use of more renewable energy. SustainX has demonstrated a 40-kilowatt prototype and is now completing a one-megawatt system, slated to be deployed next year with the power company AES.

In conventional compressed-air storage, electricity is used to compress air, which is stored in underground caverns or aquifers. That air is then released to drive a turbine-generator to produce electricity when needed. Such storage costs roughly a tenth of what battery storage costs, but it isn’t used much because in large part because it requires a location with underground storage space. SustainX’s system eliminates this problem because it can efficiently use above-ground storage tanks rather than caverns.

Storing compressed air in tanks aboveground is impractical with a conventional turbine-based system because of the large size and cost of the tanks. SustainX’s technology reduces the cost of the tanks and other capital costs. “We do aboveground compressed-air energy storage at belowground prices,” says cofounder and vice president Dax Kepshire.

The company reduces costs by using pistons, rather than turbines, to generate electricity. Gas turbines can only generate electricity from a narrow range of air pressures. The pistons can operate at a larger range—and because air can be compressed more, the system can store more energy. What’s more, the pistons operate well after the pressure in the tank has fallen too low to drive a turbine.

The company is also improving the efficiency of the system by increasing the amount of electricity that can be generated. In conventional systems, the heat generated from compressing air is lost into the atmosphere. To generate electricity, the cold, compressed air has to be heated as it expands, which requires fuel.

SustainX’s technology greatly reduces this heat loss. It compresses air by using electricity to drive pistons inside cylinders. To release energy, expanding air drives the pistons in reverse, which drives a generator. A fine water spray inside the cylinders absorbs heat generated during compression. The hot water is stored and sprayed back into the cylinders during expansion, so the system needs no additional fuel to heat the air. The water spray increases the energy efficiency of the process from 54 percent to 95 percent, says company cofounder Ben Bollinger.

Kepshire says the system can deliver power for less than natural gas plants used to supply electricity at peak demand.

SustainX is one of a handful of companies working on isothermal compressed-air storage technology. The other major player in the field, Newton, Massachusetts-based General Compression, recently raised over $50 million for its system, which uses a wind turbine to power the compressor and air expansion unit. There are only two operating compressed-air energy storage installations in the world, one in Alabama and one in Germany, totaling 440 megawatts. Two projects are under construction in the United States: a 300-megawatt facility in Kern County, California, and a 145-megawatt facility in Watkins Glen, New York.

Isothermal compressed-air storage has the potential to be more energy-efficient than conventional systems, but full-scale demonstrations will be the proof, says Mark Johnson, a program director at the U.S. Department of Energy’s Advanced Research Projects Agency-Energy. It might take five years or longer for such systems to prove economical and find wide use, he says.

Robert Schainker, a senior technical executive at the Electric Power Research Institute in Palo Alto, California, says that aboveground storage will be limited to less than four hours of storage—for larger amounts of storage, the economics look better for underground caverns. Adding a kilowatt hour of storage to a cavern might cost $2, he says, compared to $250 for adding a kilowatt hour of storage tanks.