Advances in energy storage could help make wind and solar power a mainstay of our electricity system by taking root not only in the Great Plains and the Mojave Desert but also Park Avenue high-rises and urban data centers.

Some of the most compelling needs for storing energy like digital bits are now coming from businesses and utilities in cities, turning them into a crucial proving ground for a technology many consider vital for the electricity grid of the future. Cheap, multi-hour energy storage—a long sought but largely unrealized goal—could convert a variable source, such as wind and solar, into one that can supply power on demand as fossil fuel or nuclear plants do now. A solar cell converts the sun’s energy into a flow of electricity, which a battery stores as chemical energy.

In cities pockets of energy storage distributed throughout a municipality would make the grid infinitely more flexible and perhaps even more reliable. Instead of only shipping energy from big centralized power plants, batteries could supply power closer to where it is actually used. Big batteries in urban buildings or next to a utility transformer could supply energy locally when power plants are struggling to meet soaring air-conditioning loads on hot summer days.

“Energy storage in a city makes a lot of sense because cities are where the loads are, and those loads go up and down,” says Haresh Kamath, program manager for energy storage at the Electric Power Research Institute (EPRI). “You could accommodate those shifting loads by having more power generation in the city, but it’s expensive and you’d need to tolerate the emissions, the noise and bringing fuel in.”

So why is storage still a tiny sliver of the grid’s power capacity? The main reason is cost. Low natural gas prices and stored energy from pumped hydroplants, where water is pumped uphill at night and released to run a generator at peak times, set a low bar economically. That means that scientists and tech entrepreneurs are trying to get around the low price of incumbent technologies in two ways: chasing a technical breakthrough and developing clever business models. Some of these efforts are starting to show promise.

Peak shaving

The 58-story luxury apartment building Barclay Tower in Lower Manhattan made an unusual addition to its equipment last fall: a two-megawatt-hour battery in its basement, resembling a few rows of commercial refrigerators. Based on its ability to supply about half the 550-kilowatt peak load in common areas for a few hours, saving thousands of dollars per month, building owner Glenwood Management is a convert. It plans to install similar systems at three more commercial buildings this year. Separately, the City University of New York will install a 200 kilowatt-hour commercial prototype of a novel zinc–nickel oxide rechargeable battery this summer, made by start-up Urban Electric Power, the company’s second test installation.

Unlike a battery bank in an off-grid home, these high-tech battery systems don’t provide power when the sun goes down. Instead, they do something just as important: they save on utility bills. They address the basic economics of energy supply in which commercial and industrial users pay higher rates for electricity during peak-demand hours in the afternoon and early evening. By drawing on batteries rather than the grid during peak hours, they avoid demand charges, fees linked to a customer’s maximum power draw.

For InterContinental Hotels in San Francisco, demand charges, also simply called power charges, represent about two thirds of the monthly electricity bill, says Harry Hobbs, the area director of engineering and energy manager of six hotels. To lower them, Hobbs had only one tool at his disposal: demand response, or reducing power by adjusting thermostats and other loads during peak times. But that risked guest and employee complaints about rooms either being too hot or cold. Then Hobbs stumbled on the work of Silicon Valley start-up Stem and installed one of their refrigerator-size batteries in the historic Mark Hopkins Hotel in San Francisco.

“When I first heard them talk about this product, I thought they were totally crazy,” Hobbs says. “It was very unfamiliar to me.” Now, the manager is totally sold: he’s ordered even bigger batteries for 16 other hotels in California—as many as his supplier can muster—and is seeking to expand to other states. Since installation last fall, its first battery at the Mark Hopkins cut peak demand by 20 percent. By adding them in other hotels, Hobbs thinks he can save $2.2 million over 10 years. “We’re not reducing the amount of fuel it takes to accomplish the work,” he says. “But we are shifting the load and we’re avoiding the dirtiest ‘peaker’ plants that are used when the grid is maxed out.”

Energy cloud

High-tech batteries are not a prerequisite—the Barclay Tower system installed and managed by Demand Energy is a prosaic lead–acid battery, and Stem uses the same lithium ion batteries found in electric vehicles.

The innovation comes from the trendy “Big Data for the Big City” strategy. Modern energy storage systems are plugged into the Internet and a cloud-based analysis of energy demand can decide the best times to store energy or power a portion of the building. “What we’re enabling the customer to do is essentially build their own power plant and move from being a passive user to controlling how and when they use energy,” says Shane Johnson, vice president of customer services and product management at Demand Energy.

A typical commercial or industrial company confronts little red tape compared with a utility in installing a battery on site, or “behind the meter” in industry jargon. The cut-over just needs to make economic sense and muster support of building owners willing to accept an out-of-the-ordinary solution for the building’s electricity needs. Depending on the company’s particular requirements and prevailing electricity tariffs, Demand Energy says that large energy-users could get a return on their investment in about five years.

Utilities, meanwhile, are slowly getting onboard with storage, which could speed up the technology’s adoption. The California Public Utilities Commission recently required Southern California Edison to consider energy storage to meet about 3 percent, or 50 megawatts, of its local capacity in the years ahead. Although energy storage, in general, is expensive, it may end up being better than the alternative of installing new transmission equipment or ripping up pavement to install thicker power lines to meet rising urban demand for power.

Con Edison, the power utility that serves New York City, will test later this year how well a zinc–air battery from start-up Eos Energy Storage can beef up the local power distribution grid. A small-scale prototype will lighten the load on transmission lines during peak time and boost voltage, which can sag at the end of distribution lines.

Energy storage innovators hope that dramatically lower costs and safe designs will compel more utilities to consider the technology. Eos intends to introduce a system next year able to supply one megawatt of power for up to six hours at a price of $160 per kilowatt-hour. That’s far cheaper than lithium ion technology, for instance, and is designed to last for as long as 30 years, far longer than traditional lead–acid batteries.

“Quite a long list of utilities are starting to understand that energy storage should be part of the tool kit, but the products are not quite there,” says Steve Hellman, Eos’s president. “Until energy storage is less expensive and effective than incumbent solutions, it’ll be a point of intellectual curiosity.” A single battery can perform multiple jobs, even bidding services into daily energy trading markets to maximize earnings.

If businesses can make the economics of energy storage work, we all stand to benefit indirectly. Individual buildings could use batteries to store on-site wind and solar power, helping make the grid cleaner. And the closer energy storage is to the end consumer, the more reliable the system as a whole is, says EPRI’s Kamath. For example, tenets of apartments with energy storage could have some electricity service even during a power outage.

In the wake of Hurricane Sandy, which knocked out electricity service for millions of people, reliability has become a much higher priority for grid planners, helping to fuel interest in energy storage, says Francis Murray, the CEO of the nonprofit New York State Energy Research and Development Authority (NYSERDA). “As we rebuild in cities and reinvest in areas that were severely damaged, we need to rebuild smartly so our infrastructure is more resilient and we can rebound more quickly,” he says. A battery in the basement will be a test of whether DIY energy storage becomes a ubiquitous fixture of urban high-rises: If they can make it there, they’ll make it anywhere.